BREAKING NEWS Accused Rochester murderer has bond set at $5M, called extreme risk to the public Full Story

Netflix sinks 9% on a bad day for tech stocks

Wednesday was a bad day for high-profile tech stocks, but Netflix had it worst of all.Netflix (...

Posted: Oct 25, 2018 4:55 AM
Updated: Oct 25, 2018 4:55 AM

Wednesday was a bad day for high-profile tech stocks, but Netflix had it worst of all.

Netflix (NFLX) shares plunged more than 9%, about double the losses suffered by Facebook (FB), Amazon (AMZN), Apple (APPL) and Google (GOOG). The entire Nasdaq index closed down nearly 4.5%.

Broadcasting industry

Business and industry sectors

Business, economy and trade

Companies

Digital and streaming video

Internet and WWW

Internet broadcasting

Media industry

Movie and video industry

Netflix Incorporated

Streaming media

Technology

Banking, finance and investments

Financial markets and investing

Securities trading

Stock markets

Company activities and management

Company earnings

Financial performance and reports

Financial results

That's a big blow to a company that just a week ago was celebrating a strong quarter. Netflix added about 2 million more subscribers than expected when it reported earnings on October 16. The stock surged by nearly 14% during after-hours trading that night.

The wild swings explain part of the company's current problem. Trip Miller, managing partner at Gullane Capital Partners who has a short position on Netflix, said "high flyers" in tech often get punished severely on days when the entire market slumps. Netflix is trading at about $300 per share now, and some analysts have set price targets that are much higher.

"They tend to come down faster and harder," Miller said of those types of stocks.

There are other reasons to be skeptical of Netflix, said Miller, who as a short seller is betting that the stock will fall.

Mounting debt is one issue: The company announced Monday that it plans to take on $2 billion in new debt by offering unsecured bank notes, a measure it says may be needed for content acquisitions, production costs or other investments.

All told, Netflix could spend anywhere between $8 billion and $13 billion on content this year, according to reports from the company and outside research firms.

Netflix needs to spend a lot because the streaming market is getting more crowded, and the company will likely have less licensed content to round out its library. Disney (DIS), which is releasing a service next year, is pulling its content from Netflix ahead of the release of its service.

During its most recent earnings, the company said it expects negative free cash flow of $3 billion this year, and it has similar expectations next year.

"We don't see a path for them to get to cash flow neutrality, let alone cash flow positivity," Miller said.

Miller has other long-term concerns, too. International subscriber growth comprised the vast majority of Netflix's additions last quarter, while domestic growth has nearly topped out. He said the company could run into trouble if it ever hits a significant roadblock with audiences overseas.

There's also a risk when a company invests in this much original content, Miller added. Netflix isn't a legacy company, so it is often working on projects that aren't yet proven brands with audiences.

"They're going to spend billions of dollars on projects that nobody's heard of before, and I think that gets very dangerous," he said.

Netflix told investors last week that it knows its content investments have been huge. In a letter to shareholders, the company said it has "high confidence in the underlying economics" of that strategy.

Executives also batted away concerns about the looming competition, at least for now.

"Some day, there will have to be competition for wallet share — we're not naive about that," CEO Reed Hastings said during an investor presentation this month. "But it seems very far off, from everything we've seen."

Minnesota Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 93012

Reported Deaths: 2040
CountyConfirmedDeaths
Hennepin26447926
Ramsey10697319
Dakota7354125
Anoka5935132
Stearns390924
Washington368955
Scott250033
Olmsted236728
Nobles195416
Blue Earth16476
Wright15737
St. Louis148039
Carver13897
Clay134040
Rice13228
Mower13125
Sherburne112514
Kandiyohi9722
Winona86318
Lyon6674
Waseca6128
Steele5332
Freeborn5323
Benton5303
Nicollet52116
Watonwan5164
Todd4872
Crow Wing48118
McLeod4752
Chisago4711
Le Sueur4524
Otter Tail4224
Beltrami4055
Martin37210
Goodhue3519
Pine3090
Itasca30314
Polk2984
Douglas2862
Isanti2790
Becker2642
Carlton2561
Cottonwood2240
Morrison2221
Dodge2180
Pipestone21710
Chippewa2061
Meeker1942
Sibley1863
Wabasha1830
Brown1822
Yellow Medicine1752
Rock1640
Cass1593
Murray1582
Mille Lacs1543
Redwood1541
Unassigned15052
Renville1427
Jackson1411
Faribault1360
Swift1271
Houston1210
Koochiching1213
Kanabec1178
Roseau1170
Pennington1161
Fillmore1110
Lincoln1080
Hubbard941
Stevens941
Pope920
Big Stone760
Aitkin751
Wadena670
Wilkin613
Grant594
Lake580
Norman530
Lac qui Parle501
Marshall501
Mahnomen461
Red Lake421
Traverse290
Clearwater270
Lake of the Woods211
Kittson120
Cook60

Iowa Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 83644

Reported Deaths: 1294
CountyConfirmedDeaths
Polk15697261
Woodbury526363
Johnson508627
Black Hawk443688
Linn3941110
Story340517
Dubuque310141
Scott292628
Dallas275138
Pottawattamie206838
Buena Vista197212
Marshall177034
Sioux15043
Wapello131457
Webster121614
Plymouth110420
Clinton109920
Muscatine109154
Crawford10655
Cerro Gordo101821
Warren9486
Jasper81732
Des Moines7647
Marion7536
Tama70431
Henry6854
Carroll6535
Lee6207
Wright5721
Dickinson5086
Boone5008
Bremer4837
Washington45311
Louisa42815
Mahaska39119
Delaware3833
Franklin34618
Floyd3363
Jackson3303
Winneshiek3246
Hamilton3223
Clay3164
Lyon3074
Benton3061
Hardin2951
Winnebago28913
Poweshiek2788
Butler2672
Buchanan2651
Clarke2643
Jones2643
Emmet26010
Shelby2581
Allamakee2566
Kossuth2540
Chickasaw2470
Clayton2443
Sac2440
Guthrie2416
Cedar2381
Cherokee2352
Grundy2193
Madison2122
Fayette2112
Harrison2073
Iowa1981
Mitchell1880
Howard1866
Humboldt1843
Palo Alto1830
Calhoun1793
Hancock1772
Mills1771
Cass1602
Monroe15710
Pocahontas1562
Lucas1536
Page1530
Osceola1510
Monona1451
Jefferson1371
Appanoose1333
Union1283
Taylor1271
Davis1244
Ida1151
Van Buren1131
Fremont1100
Keokuk1051
Worth1040
Greene990
Montgomery905
Wayne852
Audubon811
Adair691
Decatur670
Ringgold492
Adams330
Unassigned40
Rochester
Clear
77° wxIcon
Hi: 80° Lo: 57°
Feels Like: 79°
Mason City
Clear
81° wxIcon
Hi: 85° Lo: 58°
Feels Like: 82°
Albert Lea
Clear
82° wxIcon
Hi: 84° Lo: 58°
Feels Like: 83°
Austin
Clear
81° wxIcon
Hi: 82° Lo: 58°
Feels Like: 82°
Charles City
Clear
82° wxIcon
Hi: 82° Lo: 60°
Feels Like: 83°
Tracking more warmth before cooler weather arrives for the weekend
KIMT Radar
KIMT Eye in the sky

Community Events