Netflix Loses $18 Billion In Value After One Day
Netflix Inc. shares experienced their largest decline this year due to a projected third-quarter revenue that missed Wall Street’s expectations, implying that the company’s recent strategies, such as password-sharing restrictions and a new advertising plan, have not yet boosted sales growth as predicted.
The shares experienced an 8.4 percent fall to $437.42 in New York, the steepest drop since last December. Despite professing no expertise in economics, stand-up comedian Zack Bornstein shared on Twitter his calculation showing that Netflix lost $18 billion in market value in just one day.
In his caption, Bornstein argues that the $18 billion loss could have funded all demands made by Netflix‘s writers and actors for 36 years.
24 hours after sharing great news with investors, Netflix dropped $18 billion in value, a total drop of 8.4 percent.
His comment was a clear critique of the streaming giant, which is a major target of the current strikes by Hollywood writers and actors. The strikes are ongoing as these industry professionals seek enhanced streaming residuals, improved wages, better working conditions, and job security in the face of advancing AI technology.
Even with the addition of close to 6 million subscribers in the second quarter, Netflix’s revenue growth and projections fell short of expectations. Greg Peters, the Co-Chief Executive Officer, mentioned that significant returns from initiatives like the crackdown on password sharing and the new advertising plan would only materialize after several quarters.
However, some analysts offered a differing perspective, asserting that the value of the company fundamentally hinges on the quality of its content.
Many are concerned that Netflix might exhaust its content due to the current strikes by the Writers Guild of America (WGA) and the Screen Actors Guild – American Federation of Television and Radio Artists (SAG-AFTRA). However, during the Q2 2023 earnings call, Netflix’s co-CEOs Ted Sarandos and Greg Peters dismissed these concerns, stating that a content shortage was not an issue.
Comedian Zack Bornstein pointed out that Netflix could fund every WGA demand for 36 years with the money lost in one day.
While expressing a desire to reach an agreement with the unions promptly, they assured that they have a substantial amount of content in the pipeline, including British Royals drama The Crown, Top Boy, and the reality series Too Hot to Handle.
In light of the ongoing strikes that have led to a suspension of production and a significant reduction in spending, Netflix has increased its 2023 forecast for free cash flow from at least $3.5 billion to a figure of $5 billion.
However, the company faces a potential downside; once the strike-induced hiatus ends and production activities resume, it’s expected to see a decrease in free cash flow next year, largely due to the expected rise in operational costs associated with restarting its diverse range of production activities.
Netflix is currently the largest streaming company, with billions of dollars available in cash despite losing $18 billion in value in one day.
For now, Netflix maintains a positive outlook for its future, anchored by a robust inventory of content and a surge in subscriptions following password-sharing restrictions. Yet, analysts warn that the rapidly growing number of streaming platforms may also significantly challenge Netflix’s leading market position.
Although Netflix currently boasts a substantial content pool, a prolonged period of ongoing strikes could potentially put the streaming behemoth in a precarious position.
