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Why Netflix Inc. Shares Fell 6% Today

By Anders Bylund - Sep 5, 2018 at 4:30PM

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Investors reacted to an analyst's report today about Apple's potential plans to launch a video streaming service.

What happened

Shares of Netflix ( NFLX -0.27% ) closed 6.2% lower on Wednesday, hamstrung by a reputable analyst firm's report on a competing service offering from mighty Apple ( AAPL 2.19% ).

So what

In a research report on Apple's video-service plans, Morgan Stanley analyst Katy Huberty estimated that an as-yet unannounced Apple Video service could collect revenues in the neighborhood of $500 million next year and $4.4 billion in 2025. The report hardly moved Cupertino's trillion-dollar market cap, but Netflix investors ducked for cover.

A young couple shoveling popcorn into their mouths, staring wide-eyed at the TV screen.

Another new video platform? Fire up the popcorn! Image source: Getty Images.

Now what

For comparative purposes, Netflix's top-line sales have reached nearly $4 billion per quarter. Huberty is not arguing that Apple is about to kill Netflix, but her report does outline a rapidly growing global market for streaming video services.

There's plenty of room for several successful players in that expanding space, and I don't think Netflix's management is sweating bullets over Huberty's report. I see no reason for Netflix investors to throw in the towel, either. Today's share price drop is a classic overreaction to a well-reasoned market analysis that doesn't really change anything.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
AAPL
$160.24 (2.19%) $3.43
Netflix, Inc. Stock Quote
Netflix, Inc.
NFLX
$663.84 (-0.27%) $-1.80

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