Please ensure Javascript is enabled for purposes of website accessibility

Why Netflix Inc. Shares Fell 6% Today

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

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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 2.08%) closed 6.2% lower on Wednesday, hamstrung by a reputable analyst firm's report on a competing service offering from mighty Apple (AAPL 1.56%).

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.

Anders Bylund owns shares of Netflix. The Motley Fool owns shares of and recommends Apple and Netflix. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.