Wall Street reacts to Netflix price cuts

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Wall Street reacts to Netflix price cuts

Wall Street is expressing its feelings for Netflix NFLX over the streaming giant's new price cuts.

It hates them.

The company revealed price reductions on February 23, but Netflix shares have underperformed the S&P 500 by about 7%, according to Yahoo Finance data. Netflix's stock has dropped 9.3% since the pricing announcement, compared to a 2.5% drop for the S&P 500.

In Europe and the Middle East and Africa, about 60% of the markets were in Asia-Pacific and in Latin America.

Citi analyst Jason Bazinet thinks the price cuts reflect the pending global enforcement of password sharing. By lowering prices, Bazinet says Netflix may be aligning the retail price of a subscription with the utility each user derives from the service.

Bazinet believes that Netflix's decision isn't a good fit for investors as it could affect profit margins and free cash flow.

Such dramatic price reductions across so many markets confused the Street, Bazinet says. The story of Netflix will be a little complicated as investors contend with the new Ad tier and concurrent password sharing enforcement. That confused state on Netflix is already playing out, according to the chart below.

Sozzi follows BrianSozzi on Twitter and LinkedIn.