Companies
Netflix tumbles after weaker fourth-quarter outlook
Netflix shares fell to a 52-week low after the company's forecast for the fourth quarter came in below expectations. The weak outlook outweighed a third-quarter profit result that topped estimates.
Quick Read
- Netflix shares tumbled 5.3% to a new 52-week low, erasing $15 billion in market value.
- The company topped third-quarter profit estimates, but its fourth-quarter forecast fell short of expectations.
- Reports tied the concern to viewer engagement, advertising growth and competition.
- The broader market rose on the day, with the S&P 500 up 0.6%.
How far did Netflix shares fall?
Netflix shares tumbled 5.3% on Wednesday to close at $65.04. That was a new 52-week low, the lowest price of the past year.
Why it matters: The company lost $15 billion in stock market value, leaving it worth $270 billion. Shares worth $6.6 billion changed hands during the session.
Why did the outlook weigh on the stock?
Netflix reported third-quarter profit above the consensus, the average analyst forecast. Its guidance, the company's own forecast for the next quarter, landed below what analysts had looked for.
Investors often give guidance more weight than the quarter just ended, because it describes the months ahead. Reports said the weaker outlook raised worries on several fronts. Those included how much viewers use the service, how quickly advertising sales grow and how hard rivals compete for audiences.
How does the drop compare with the wider market?
The decline ran against a rising market. The S&P 500 rose 0.6% and the Nasdaq-100 gained 1.1%. A fund tracking communication services stocks slid 1.1%.
Over a longer stretch, the shares now sit 47.6% below their 52-week high of $124.14. A $1,000 stake bought a year ago would now be worth $524.
What comes next?
What’s next: The date of the company's next quarterly report is not yet on the calendar. Later updates on engagement and advertising may shape how the stock trades from here.
For the broader market, the Federal Reserve announces its interest-rate decision on Oct. 28 at 2 p.m. ET, followed by the chair's press conference.
For readers
What it could mean for you: People who own Netflix shares directly felt this news in full, because a single stock has no other holdings to soften a company's own setback. The weaker outlook may keep attention on viewer engagement and advertising growth in the months ahead. Any later update from the company that changes that picture could move the shares again, in either direction. The news touched owners of broad index funds far less, since Netflix is one holding among many in those funds.
Questions and answers
Why did Netflix stock drop?
The company's forecast for the fourth quarter came in below analyst expectations. That outweighed third-quarter profit that beat estimates.
How low did Netflix shares go?
The shares closed at $65.04, a new 52-week low. That leaves them 47.6% below their 52-week high of $124.14.
What worried investors about the Netflix outlook?
Reports said the weaker guidance raised concerns about how much viewers use the service, how fast advertising sales grow and the pressure from rival services.
The numbers
| NetFlix (NFLX) price | $65.04 |
|---|---|
| NetFlix (NFLX) change | −5.31% |
| NetFlix (NFLX) market value | $270 billion |
| NetFlix (NFLX) 52-week high | $124.14 |
| S&P 500 change | +0.58% |
| 10-year Treasury yield | 5.13% |
Wednesday’s close
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Not investment advice.
