Netflix Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Netflix (Nasdaq: NFLX  ) have lost their streaming connection today and have fallen 16% as of this writing on a forecast decrease in subscribers.

So what: Oh, how the mighty have fallen. Netflix now expects to have 24 million subscribers at the end of the third quarter, down from a previous estimate of 25 million. What's more surprising is that the company's DVD-only subscription is expecting a paltry 2.2 million subscribers. Could this spell the end of Netflix's original business?

Now what: When a company like Netflix is on its high horse it seems like no one can beat it -- except itself. That was my argument when Netflix raised prices and I said it was time to unplug Netflix two months ago. Higher prices have forced customers to make choices about Netflix's value proposition and more people than expected think their dollars are better spent elsewhere.

I certainly don't see this as a good sign going forward and wouldn't want to be holding onto shares of Netflix as the stock continues to plummet. Are you holding onto your Netflix shares? Leave your comments on Netflix below.

Interested in more info on Netflix? Add it to your watchlist by clicking here.

Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

Motley Fool newsletter services have recommended buying shares of and buying puts in Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (11) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 15, 2011, at 3:30 PM, degaus wrote:

    I have confidence that Netflix will still return anyone's investment. While they may be taking a dip due to the recent results pertaining to a failure in retaining 1 million subscribers and a failure in the contract continuance of $200 million with Starz, do not forget about the successes of the management in the past, as well as their brand new launch in S. America. The way I see it, this dip is called a "discounted price" on a great stock!

  • Report this Comment On September 15, 2011, at 3:46 PM, franklinomics wrote:

    I put a sell stop on NFLX well above where I bought it and where it is at today, so no loss there. I would still consider buying back in at a price lower than my initial buy So far it is - I just have to see where it will go next week. The Starz issue, and competition from AMZN (which I also own) and others give me pause, but like Degaus in his/her comment, I will look at it as a great company stock to be bought at a discount. Personnaly, I love the streaming service and was never interested in the CD mail side of it.

  • Report this Comment On September 15, 2011, at 3:52 PM, jabroniman wrote:

    Their streaming movies suck, and after the price hike STARZ pulled their movies. So now Netflix users pay more for less - great system guys. I used to have a strong brand love for Netflix, it's not the price hike that made me mad, it's the way they did it. Their strategy was "we're raising our prices because we can". To me, that was a big FU to the brand loyal customers - great Public Relations system you have Netflix. My love for this brand did a 180 degrees after that - I don't give money to companies who treat their customers like we're not important. I believe this is why people hate Netflix now, like I said not because of the price hike, but the way they handled it and treated us.

  • Report this Comment On September 15, 2011, at 4:09 PM, Teo123 wrote:

    As a consumer, I don't think that Netflix is a good value right now.

    I pay about $120 per month for my cable, internet and land line (yes, I still have one of those). I also have a DVR. At any time, my cable lets me watch any television show that is on during the week. In addition, I can watch hundreds of free movies on demand.

    For a long time, with the newer movies costing $3-4 a crack, I relied on my NFLX subscription. I watched about 3-4 movies per month -- maybe 5 or 6 during the winter. And at $10 per month that was a good deal.

    Now we're looking at around $16-$17 for the service so I can get the DVD and the streaming. Undoubtedly, getting any movie I could possibly want is a great thing and I can do this if I have the DVD service. But when you use it once a week, $16 per month is a lot of dough. It's four bucks per movie.

    That's not why you sign up for NFLX. I don't want another cable provider. So, NFLX can do one of two things: it can clear up the streaming service so that any and every movie can be streamed instantly (allowing us to pay the $8 monthly fee) or it can drop the monthly price for the streaming and DVD service.

    But it won't be able to keep the price tag as it is today. There are too many alternatives.

  • Report this Comment On September 15, 2011, at 4:32 PM, kgr19 wrote:

    I am glad I sold NFLX before to make some money!

    But the way things are turning out for Netflix, I would say...I did expect. Since I am one of the customers who had DVD service for 5 years and stopped it cause of the price hike.

    And streaming-only service is awful....with very small catalog and very restricted access on the website (like no access to trailers if the movie is not available for streaming)

    I am thinking of leaving Netflix altogether.

  • Report this Comment On September 15, 2011, at 5:02 PM, joenstacey wrote:

    another thing to watch is USPS they WILL stop their first class service..1-3 day delivery which netflix uses its the only way with stopping saturday delivery 4 them to stay in business. if this happens and will by summer netflix dvd rentals will die..no one will pay 4 dvds when turn around will be 6-10 days.....sell netflix...........sorry 2 say

  • Report this Comment On September 15, 2011, at 5:46 PM, rhealth wrote:

    There's no end of reasons to kick a company while it's down. I think you folks exaggerate the problems, which definitely are problems, dont get me wrong, but Netflix has had such a smooth ride up till now, they were bound to hit this wall. For me it comes down to $120 for crap on cable or $8 a month for a bunch of movies i like? hmmm tough choice! I'll be keeping my subscription and my shares.

  • Report this Comment On September 15, 2011, at 6:33 PM, stan8331 wrote:

    I'm with rhealth. Netflix may not look like a great deal to someone already paying $120 a month for cable (if they are unwilling to cut back on their cable plan) but I'm still waiting to hear of a competitor actually offers a better value (for anyone who watches more than a few movies a month).

    It's also important to keep in mind that Netflix is focused on upgrading the streaming catalog. That's what their pricing change was all about. Any potential competitor would be very foolish to count on Netflix being a stationary target in terms of streaming.

  • Report this Comment On September 15, 2011, at 10:18 PM, abcjr wrote:

    For months Tom and David Gardner have been enthusiatically praising NFLX. Now I wonder if they still have the faith they have been proclaiming and are holding this stock, or are they dumping it as it appears it would be prudent to. I am losing faith in the SA and beginning to believe from the long ads ending in special opportunities re other programs that come in over the internet that advertising is more important than FOOLish advice offered.

    Can someone disabuse me of these notions?

  • Report this Comment On September 16, 2011, at 12:46 AM, PageWraith wrote:

    Seeing as they were paying under 200 million for content and will be approaching 2 Billion for that same content down the road, blame the studios, not Netflix. Where did you think the money was going to come from?

  • Report this Comment On September 16, 2011, at 12:13 PM, Darwood11 wrote:

    I sold about 2/3 of my Netflix shares some months ago,when it was ramping up toward $300 per share. However I held that 1/3 because I also liked the service and see it as viable.

    I've commented elsewhere at the Fool on Netflix and I am not really concerned at this time. Bottom line is Netflix streaming + DVD content is inexpensive relative to Comcast, where I have a minimal ($20 monthly) package.

    Why did I sell that 2/3? Because I felt I could put the money to better use elsewhere, and I did.

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