Netflix (NFLX) shares have been streaming downward over the past month with the stock shedding 20 percent of its value in 30 days. What’s the standard definition of a bear market? A price decline of 20 percent or more.
What gives? There’s been a barrage of issues plaguing the stock, but I pin the rapid decline on four factors:
1) Profit-taking. Netflix was the best-performing stock in the S&P 500 last year rocketing up more than 300 percent. Weakness in 2014 means big investors are taking profits.
2) Apple + Comcast + Amazon. Rumors about Netflix’s competitors continue to swirl. Apparently, Apple (AAPL) in talks with Comcast (CMCSA) to form a joint video-streaming service. In addition, Amazon’s planning to offer free (yes, free!) streaming content to all web users.
3) Market correction. It’s been risk-off in the market this month, and the Nasdaq in particular has gotten hit hard. While conservative stocks have held up relatively well, tech leaders and biotechs plummeted (Netflix included).
4) New expenses. In the near-term, it looks like net neutrality is going out the window. The two companies that are going to get hit harder than any others by that are Google (thanks to YouTube) and Netflix. Exact costs are unclear, but they won’t be trivial.
These factors have some forecasters poo-pooing Netflix. Wedbush, for instance, just reiterated its $175 price target for Netflix over the next year. That would be a decline of more than 50 percent from current levels.