In one day, Netflix dropped $17 billion in value. That's almost the entire value of CBS (just over $19 billion). Netflix is still worth around $142 billion, but that $17B drop on Thursday was the biggest single-day drop ever for the streamer.
Why now? Well, you probably heard the news on Wednesday about Netflix's disappointing Q2 results. The streamer reported only 2.7 million new subscribers in the second quarter of 2019, which was about 2.5 million fewer than expected. Not only that, Netflix lost 126,000 U.S. accounts, and it was the first time in eight years Netflix had lost U.S. subscribers.
According to CNBC, the last time Netflix lost U.S. subscribers was in 2011 after backlash when Netflix raised prices and separated the streaming service from the DVD mailing service.
Netflix now has about 151.6 million subscribers worldwide. Also, despite not adding as many subscribers as expected, Netflix's 2019 Q2 revenue matched expectations at $4.9 billion, up 26% from the same period last year. Also, earnings per share of 60 cents surpassed Netflix's own expectation of 55 cents, and Wall Street analysts’ expectation of 56 cents a share.
But that didn't stop Netflix's stock from dropping 10.3% Thursday to $325.21 per share. That was its worst single-day percentage drop in three years, per TheWrap.
Netflix issued a letter to shareholders, saying it missed its forecasts across all regions "but slightly more so in regions with price increases." The company's execs said they don't believe competition was a factor, but rather the second quarter's "content slate drove less growth" and Q1 had so many new additions that there "may have been more pull-forward effect than we realized."
So Netflix is blaming not enough content to draw new subscribers from April to June, the fact that a lot of people already added the service earlier in the year, and also the recent price hikes.
In better news for Netflix, Stranger Things Season 3 just dropped in the third quarter, and that has already given Netflix huge viewer numbers from its subscribers. Netflix said it expects to add 7 million new subscribers in Q3, which would be a lot more than the 6.1 million it added this time last year.
Interesting that Netflix made a point to say competition was not to blame for the Q2 subscriber misfire. That may not be the case this time next year. Disney+ is coming in November, and it's expected to cost a lot less than Netflix and also potentially steal a lot of Netflix customers, although Netflix is not too worried about that. We have other new streamers rising -- including WarnerMedia's HBO Max.
Netflix doesn't seem concerned about the future, but it's a troubling sign that the company can drop that much in market value overnight after one piece of bad news. What will be the story this time next year?