Netflix Crumbles: Is This Bad News For Apple Stock?
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Netflix stock (NFLX) – Get Netflix, Inc. Report investors have been licking their wounds this Thursday. After the streaming company delivered disappointing Q1 subscriber metrics on earnings day, shares tanked by 40% at one point during the trading session, shedding $60 billion in value along the way.
Apple stock (AAPL) – Get Apple Inc. Report was unable to dodge broad-based bearishness towards tech names. Shares of the Cupertino company also dipped on April 20, although by a much tamer 0.1%.
Could Netflix’s earnings developments have a substantial negative impact on Apple’s future financial results and its stock price? The Apple Maven looks at this question from a couple of different angles.
Figure 1: Netflix Crumbles: Is This Bad News For Apple Stock?
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(Read more from the Apple Maven: Apple Stock: Investors Should Know This Ahead Of Earnings)
Streaming services in the penalty box
The bad news for Apple and all companies that run a video streaming service is that Netflix’s drop in subscriber count in Q1 is probably reflective, in part, of weakness across the industry.
The Los Gatos company listed several factors that have contributed to it losing 200,000 subscribers in Q1, the first “negative net addition” print in a decade. All of the key reasons offered could reasonably impact all streamers, not only Netflix.
Of course, there is the COVID-19 and post-pandemic effects. Following several months of confinement at home, which helped to propel demand for video streaming services, consumers now seem ready to step out of the house and spend money in offline experiences.
But the end of lockdowns does not tell the whole story. In fact, Netflix admitted that the post-COVID headwind narrative masked underlying issues that are now coming to light.
For instance, Netflix seems to believe that its addressable market of households with broadband connectivity has been slow at adopting on-demand entertainment. The uptake of connected TVs and high data costs were a couple of the challenges listed.
Also, competition has increased quite a bit in the past couple of years. Every major media company now seems to have at least one streaming service in the market. For example, Disney (DIS)…
