Netflix Stock News: Netflix Falls in Last 3 Months of 2014

Netflix had a roaring 2013, featuring a jump of about 300% in its stock price. The online video-streaming service started out the past year strong as well, with its stock price increasing over 20% through October 15th. Netflix announced its 3Q14 earnings that day, and the results came in short of expectations, disappointing investors. The stock fell more than 25% in after market trading, wiping out about $7 billion from the company’s market cap.

NFLX

The company announced that they added fewer than 1 million net U.S. subscribers during that quarter, less than the 1.3 million that it expected. Also disappointing investors was the streaming-service’s outlook for the next quarter, as it only estimates 1.85 million new subscribers in 4Q14, much less than the 2.33 million additions it achieved in the same quarter the previous year. Netflix blamed the decrease in user growth on a recent price increase the company undertook.

netflix stock news

The above forecast is from the top tech stocks package. The “Stock Market Forecast Based on Algorithms” article featured a prediction of the algorithm made on September 7th, 2014 over the three-month time horizon. This came before Netflix announced its financial results of 3Q14 on October 15th, but still accurately predicted the bearish trend for the stock over that time period. The stock had a signal of -11.60, indicating that the stock price would go down, and a predictability indicator of 0.33. In accordance with the algorithm, Netflix’s stock price decreased 26.23% over three months.

Analysts are divided about the future of the stock, as it has been extremely volatile in recent years. The stock price reached $300 a share in 2011, crashed to under $100 in 2012, and made all that back in 2013. Looking to 2015, some see now as a good time to buy Netflix stock on the cheap, while others believe it will fall even further. One positive sign for the company is growth is expected to remain strong, especially internationally. Revenue grew roughly 21% in 2013 and is forecasted to have grown 25% in 2014. Along with a price increase for new subscribers, this should help the company’s top and bottom lines. These facts mean that Netflix could be a buying opportunity right now before the stock rebounds.

Others are not convinced that this is just a story of missed projections. They believe that the stock could continue to plummet much like it did in 2012 and that the fall of the stock price is merely the beginning, not an overreaction. These detractors point to expensive content acquisitions and international losses that eat into the company’s profit potential. Netflix spent $90 million on its recently released original series, Marco Polo, mainly to attract new international subscribers. The streaming-service views international subscribers as a future revenue stream, but this is not yet a reality. International streaming members have tripled since 2012 to 15.8 million in 3Q14, but that growth was at the cost of a -8.8% margin contribution for the first nine months of 2014. Netflix expects earnings of just 44 cents per share for 4Q14, about half of Wall Street was looking for.

With such a volatile stock that divides analyst’s opinion, a self-learning algorithm such as the one used by I Know First becomes extremely valuable. The algorithm is completely empirical, meaning it is based on historical data and not on any human derived assumptions. Netflix, which is an extremely volatile stock with massive gains and losses in short periods of time, is a stock that an investor using the algorithm could make a healthy profit off of.