Netflix Shares Down 16% This Year as Growth Slows

By Douglas A. McIntyre Updated Jan 13, 3:10AM EST · Published Sep 26, 8:55AM EDT

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Netflix Shares Down 16% This Year as Growth Slows — © courtesy of Netflix Inc.

Netflix Inc. (NASDAQ: NFLX) shares are not acting like those of a growth stock. They are off 16% this year, compared to a 6% increase in the Nasdaq. Competition and a miscalculation in pricing are primarily to blame.

In May, Netflix raised it monthly rate for some subscribers from $7.99 to $9.99. The company lost subscribers, which affected its overall growth. The damage, however, may have been more than Netflix management expected.

Netflix added only 1.68 subscribers in its most recently reported quarter. Only 160,000 were in the United States. While Netflix has 83.2 million customers worldwide, it also has huge investments in original programming. If Netflix growth flatlines, theses costs become a greater burden, margins erode and Netflix starts to look like other broken growth businesses.

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A more sinister cause of the stock price problem is less well-defined than a single quarter of poor subscriber growth. Apple Inc. (NASDAQ: AAPL) and Amazon.com Inc. (NASDAQ: AMZN) are competitors, and ones with almost unlimited financial resources. Hulu is trying to sneak up on the industry too. Huge media companies have started to move into an industry in which they relied on others to distribute there content. One of the best examples of this is the Time Warner Inc. (NYSE: TWX) HBO streaming product. Big media wants to keep all the revenue, instead of sharing it with other parties.

Netflix shares have run sideways for a month, trading around $95. They will break lower if the next quarter does not prove the company has discovered a new way to add subscribers.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.