Netflix, Inc. (NASDAQ:NFLX) released its quarterly results on Monday and although the shares got a slight bump in price on the continued sales growth, ultimately the stock regressed back on Tuesday to where it was at the end of the previous week, for relatively no gain.
The stock’s lack of progress after the earnings report suggests that investors might finally be cooling to Netflix’s growth and that the share price may finally have found a peak at around $204. Although Netflix continues to grow its subscribers it hasn’t fixed the problems we saw in earlier releases: slowing domestic growth, and poor margins from international subscriptions.
The danger for Netflix is that the more that it moves to being a producer of content rather than just being a curator of it, the more expensive it becomes and the less competitive Netflix will be. While its original content may get strong reviewers from users, it will be hard to compete head-to-head against a brand like Walt Disney Co (NYSE:DIS) that is renowned for its content and popularity among young and old users.
What has made Netflix so successful has been its ability to provide a wide array of content to its users. However, as other companies get involved in offering their own streaming services, all of a sudden what Netflix has been providing may no longer be available on its services, and that has pushed the streaming company to focus on producing its own content. The problem is that this is a lot more expensive to do and Netflix faces much stronger competition in this space.
