Pandemic winners are losing
The future path of the pandemic is uncertain, but investors may have already made up their minds about the prospects for companies that had prospered months earlier. Netflix and Peloton plunged late in the day yesterday, on signs that “stay at home” stocks, which were already under pressure, could take a turn for the worse as people begin to venture out again.
Netflix reported its fourth-quarter earnings after the market closed, and warned that subscriber growth was about to slow. This sent the streaming giant’s stock down 20 percent, erasing more than $40 billion in market cap. Ed Lee, a media watcher at The Times, says the report suggests that the company is more vulnerable to competition than its investors are comfortable with:
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Rivals are eating into Netflix’s business. The company, which now has 222 million subscribers, forecast that it would gain only 2.5 million customers in the current quarter, far from analysts’ average estimate of just over 6 million. Competition from the likes of Disney+, Amazon Prime Video, HBO Max and others “has only intensified over the last 24 months,” Netflix said.
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Other streamers have some advantages. Those services are attached to big studios, so they already own a ton of content. (Amazon is about to own a studio, if regulators approve its deal to buy MGM.) That gives them license to market their streaming efforts outside the U.S., where all the growth is. Netflix can’t do the same as easily. In order to compensate, Netflix last week announced a price increase for U.S. subscribers.
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Investors may reconsider the multiple they pay to own Netflix’s stock. Until yesterday’s decline, investors were essentially paying double for each dollar of expected profit at Netflix, versus tech giants like Meta and Alphabet. But are Netflix’s growth prospects really that good? The answer, at least for now, is no.
Meanwhile, Peloton is similarly struggling, as the at-home exercise equipment maker grapples with waning demand for its bikes and treadmills. Its shares closed 24 percent lower yesterday — and are down some 80 percent over the past six months.
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Source: https://www.nytimes.com/2022/01/21/business/dealbook/netflix-peloton-stocks.html
