The streaming behemoth Netflix Inc. (NASDAQ:NFLX) found itself in a market maelstrom as its market capitalization nosedived by a staggering $9 billion during Wednesday’s session.
The catalyst? A word of caution from the company’s CFO, Spencer Neumann, delivered at a Bank of America Conference.
Netflix shares plummeted, diving by over 5% during the afternoon trading, and shaping up to become the third-worst session endured by the streaming giant in 2023.
Neumann’s revelation about the company’s expected profit margins was at the center of the storm.
He offered a subdued forecast for operating margins, pegging them in the range of 18% to 20%, a far cry from the prevailing consensus, which stood firm at 22.1%. In an attempt to cushion the blow, he also stressed that Netflix is “nowhere near” its peak margins.
The catalyst? A word of caution from the company’s CFO, Spencer Neumann, delivered at a Bank of America Conference.
Netflix shares plummeted, diving by over 5% during the afternoon trading, and shaping up to become the third-worst session endured by the streaming giant in 2023.
Neumann’s revelation about the company’s expected profit margins was at the center of the storm.
He offered a subdued forecast for operating margins, pegging them in the range of 18% to 20%, a far cry from the prevailing consensus, which stood firm at 22.1%. In an attempt to cushion the blow, he also stressed that Netflix is “nowhere near” its peak margins.
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NewsTranscript
00:00 First one, let's get to Netflix stock market
00:03 roller coaster yesterday.
00:04 Netflix making headlines as his market capitalization
00:08 took a major hit.
00:09 A cautious statement from the CFO, Spencer Newman,
00:13 sent shockwaves through the market.
00:15 Netflix expected profit margins ranging from 18 to 20%
00:20 compared to the consensus of 22.1%.
00:24 Let's analyze what this could mean for the streaming giant
00:27 and its investors.
00:29 - Again, another tape bomb.
00:31 I mean, there's just seems to be a few of these
00:34 that it's like, when the random news comes lately,
00:38 it doesn't feel like it's good news
00:40 unless it's some product on AI
00:41 because they're still throwing that out.
00:43 Like it's like when the financials come out,
00:45 it's American Airlines, oh, we're lowering guys.
00:47 Netflix, we're seeing issues here.
00:50 I mean, it just feels like the random news
00:52 that keeps hitting the tape is been bad news.
00:57 So I don't know, I keep, you know,
00:59 and the people are saying, you know, I'm bearish,
01:01 I'm bearish all the time.
01:02 There's a big difference, one rant before you guys go on,
01:05 there's a big difference between bearishness
01:07 and cautiousness.
01:09 I'm cautious here.
01:10 I'm still trading, still in the markets every day,
01:14 I'm still doing stuff, but I'm investing very cautiously
01:17 because there's just a lot of unknowns.
01:20 And I think as an investor, and especially as a trader,
01:24 it is your number one job first to protect your capital.
01:27 Second, then start thinking about making money.
01:30 In this type of environment, there's just a lot of risk.
01:32 And that's why when I'm getting paid 5.5%,
01:35 Bank of America coming out yesterday,
01:37 Joel and saying, there's a lot of money,
01:39 market funds that are, you know, at all time highs,
01:42 or, you know, a lot of money on the sidelines
01:44 and all that money is gonna come back
01:45 pouring into the market here,
01:47 potentially by the end of the year.
01:48 That's what Bank of America was saying.
01:50 I mean, come on.
01:53 You know, do some homework.
01:55 This money that is sitting in these money market funds
01:57 is getting 5.5%.
01:59 It's not getting 0.5% anymore.
02:02 It's not getting 1%.
02:03 It is getting paid to wait.
02:05 And here, you know, we're not,
02:06 like if you just started investing in 2020,
02:09 you got this market in 2020 that just was out of the norm.
02:13 The markets over the long run produce 7% returns a year.
02:18 - And what are we up on a year?
02:20 You can't, yeah, they're not gonna-
02:21 - 5.5% risk free.
02:22 So you're taking on all this risk
02:25 for the potential of an extra 1.5%.
02:28 I mean, if you were just looking
02:29 at a longer term perspective,
02:30 like I'd argue almost you're better at 5.5% or 6%
02:34 for the next five years than an unknown market.
02:36 But, you know, we don't know what's gonna happen
02:38 and there's opportunities.
02:40 But I just think that money that's sitting on the sidelines
02:42 isn't that hungry, isn't that starving
02:46 to come back into this market
02:47 when it's getting paid 5.5% or 6%.
02:50 - Well, I just wanted to do the technicals real quick.
02:52 - Yeah.
02:53 - Netflix, I wasn't sure if that rant was over.
02:55 (indistinct)
02:57 I don't do this much SOH on this one, sit on hands
03:01 because Netflix, I mean, I see a pair of lows at 407
03:06 and then 400.
03:07 I don't know if it has the gas to get back, you know,
03:10 to that low on this news.
03:12 Coming back on the upside, I just don't think, you know,
03:15 when you get these kind of interday flushes,
03:18 I mean, all of a sudden you're long at 435,
03:21 market's okay, boom, all of a sudden you're at 420.
03:25 So it's gonna be hard.
03:26 It's gonna be hard for it to go up.
03:28 I'd be patient to wait for 407 or 400 on the downside.