What's going on?
The online video streaming platform Netflix reported its first quarter results on Monday – and it looks like Red is actually the new Black… as in, the stock saw red and sold off more than 10%! (You can check out the teaser for the new season of “Orange Is The New Black” here.)
What does this mean?
Back in January, investors got pretty excited when Netflix said it was available in virtually every country in the world (except China). If Netflix is to keep growing at anywhere near the rate it has in recent years it must grow outside of the United States (where it already has a big presence). However, on Monday, Netflix revealed that its own projections for international subscriber growth in the coming months were well below investors’ expectations – and the stock got hit pretty hard as a result.
Why should I care?
For the stock: Amazon is becoming more of a threat. One of the main tenets of Netflix’s strategy has been to produce high-quality programming that is only available to Netflix subscribers (e.g. House of Cards). But Amazon announced its own stand-alone streaming service on Monday backed up by its own original programming (like the one hosted by the former Top Gear crew). Some investors are getting nervous that Netflix hasn’t built a strong enough barrier to entry – and that it’s vulnerable to Amazon (and possibly others) taking away its customers.
For you personally: The stock movement right after results are released isn’t always indicative of future performance. Netflix, like many companies, reports it results after the stock market has formally closed. It is, however, still possible for (typically) large, institutional investors to trade the stock. It usually moves the same way once the market formally opens the following day; but sometimes a new interpretation of the information comes to light and changes investors’ views – so keep that in mind as we report companies’ results over the coming weeks.