Netflix share price tumbles on subscription slowdown, sparking takeover speculation
Shares in Netflix have tumbled like a house of cards, down more than 10 per cent after subscriber numbers failed to hit estimates – indicating a slowdown in growth.
The streaming service forecast half a million new additions to its service in the US by June, and two million around the rest of the world, below analysts' 3.5m forecasts, in its earnings on Monday evening.
“Netflix has seen spectacular growth over the last four years, reflected in a soaring stock price, but it looks like the maturing internet TV market is becoming a much tougher place to find new customers," said ETX Capital head of trading Joe Rundle.
"Particularly in the core US market, it’s finding it harder to find new subscribers, which could see the company pivot more towards potential growth areas like Europe and Asia, which so far have been much slower in moving to online, on-demand content than North America."
In January it expanded to more than 130 new countries and Netflix boss Reed Hastings said it expects to surpass 100m users next year.
Amazon also upped the rivalry on Monday announcing a standalone streaming service, separating movie subscriptions from its Prime package.
Rundle warned that Netflix was heading for takeover target territory.
"If Netflix gets cheaper it could become a takeover target, particularly for any one of the many traditional media companies that want a piece of the on-demand pie. One such firm is Disney, which has very close ties with Netflix already and could be tempted if the price is right.”
That view was echoed by CCS Insight analyst Paolo Pescatore.
"In our view, Netflix becomes more of an acquisition target given its expanding presence, firm place in many households and, more importantly, its deep understanding of consumers' behaviour and attitudes to video.”
Shares fell below $100 to $97.24 per share in morning trading in New York.