In fact, this weakness is a great opportunity to buy Netflix stock, says Ian Winer.
Netflix stock has slumped about 10% following a surprising drop in U.S. subscribers during the second quarter. Investors now have to decide if this is a dent in the armor or time to throw up the surrender flag and sell.
So let’s dig into some critical statistics to see how much of a lead Netflix has over the competition. The other concern is about Netflix’s ability to raise prices on existing customers. The company admitted that the miss on subscribers was slightly more so in regions with price increases. This probably explains the big subscriber add number in the first quarter, as there was a “pull-forward” effect. In other words, people acted rationally and rushed to sign up before the price increase.
• Many subscribers who didn’t want to pay the increased price have already left the service, so churn will decelerate.• There are no issues around antitrust legislation, unlike with Facebook FB, -1.21% and Google GOOG, -1.42% GOOGL, -1.37%• A prolonged trade war with China is not nearly as big an issue for Netflix as it with many other companies in the S&P 500 index SPX, -0.62%
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