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Why the Netflix stock fell on Friday



What happened

Shares of streaming TV giant Netflix (NASDAQ: NFLX) fell on Friday, falling 6.2% as the market closed.

The decline in the stock was probably partly driven by Friday's broader market decline in many growth stocks such as Netflix. But a fall in the share price may also reflect some disappointment with the company's earnings during the third quarter.

  A person who watches a large slideshow of videos

Image source: Getty Images.

So what

Shares of Netflix initially jumped after the company's third-quarter earnings, released after the market closure on Wednesday. But that gain faded throughout the trading day on Thursday, with the stock closing a modest 2.4%, well below the near 1

0% profit share that looked after market hours on Wednesday.

While Netflix beat analyst estimates on some metrics – namely earnings per share and international subscriber growth – it reported worse-than-expected domestic subscriber growth during the period. The stock slump on Friday may reflect a more cautious outlook for the company as investors consider the consequences of the company's inability to meaningfully grow subscribers in the United States in recent quarters.

Now what

Management potentially contributed to investor concerns by lowering the outlook for full-year subscriber growth, reflecting an intensified competitive environment. The company had previously expected that the total net paid members' additions in 2019 would be greater than they were in 2018. But now management expects that this year's subscription growth will be somewhat less than last year.

Of course, management may just exercise more caution in their guidance on uncertainties about how new streaming TV services from Apple and Walt Disney will affect the company. The two companies both launch their streaming TV services in November.


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