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Outside the Box: Netflix’s content strategy isn’t working, so expect even more drops in the stock

Netflix stock dropped 11% on Thursday after the company reported its lowest quarterly subscriber growth numbers in three years, and its first domestic subscriber loss since 2011. These disappointing subscriber numbers show that Netflix’s investment in original content has failed to deliver the sustainable competitive advantage required to justify its valuation. The loss of licensed content, increased competition, and higher prices in the future mean investors should expect more disappointing subscriber numbers going forward.

We think the stock will fall dramatically farther as more investors realize the company NFLX, -3.11% has no chance of coming close to achieving the future cash flows baked into a current share price of around $325.

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