Netflix Turn Negative for 2019, More Pain is Ahead

Netflix (NASDAQ: NFLX) stock price declined more than $110 a share in the last three months alone. The selloff has erased all the gains that it had generated since the start of this year.

Consequently, the Netflix stock price turned negative for 2019. The stock price is down close to 26% in the last twelve months.

NFLX Netflix, Inc. daily Stock Chart

Its shares are currently hovering close to $260. Market analysts expect more pain for Netflix shareholders. This is due to rising competition from Apple (NASDAQ: AAPL) and Disney (NYSE: DIS) streaming services.

Market analysts are praising Disney Plus streaming service – which is expected to launch in November. Wells Fargo analyst expects Disney to add close to 60 million subscribers in the next year alone. In response to Netflix investment in British television production, Disney also announced a deal with Pinewood Studios in the UK.

On the other hand, analysts are also optimistic regarding Apple plus streaming service. This service is expected to launch in the final quarter this year.

The Q2 miss, coupled with the upcoming Disney+ launch in the US (and Apple as well, and more to come), has come together to make investors reevaluate their confidence in Netflix’s subs and pricing growth,” Bernstein analyst Todd Juenger says.

Bernstein analyst expects Netflix stock price to bottom around $230. The upcoming results for the third quarter are likely to present a clear picture regarding the future fundamentals.

Higher valuations have also been negatively impacting Netflix stock price.

Its shares are trading around 6.8 times to sales and 19 times to book value. This is significantly higher from the industry average of 2 times to sales and 3.2 times to book value. Its price to earnings ratio stands around 104 compared to the industry average of 20 times.

Overall, investors should keep a close on upcoming financial numbers to predict the future performance of Netflix stock price. Meanwhile, analysts are predicting short-term headwinds amid rising competition from two big players.

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.

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