The rough year continued for investors in the entertainment sector. Despite posting strong results, Netflix (NFLX) dropped by around 9% in after-hours trading last night.
The streaming media firm recorded a 13.4% Y/Y increase in revenue, to $12.56 billion. Earnings topped $0.80 per share. For this year, Netflix is forecasting revenue of $51.0 billion to $51.4 billion, or growth of 13%-14%. The free cash flow guidance of around $12.5 billion is a disappointment, compared to the consensus of $13.09 billion.
In Q2, FCF fell by one-third to $1.53 billion when analysts expected $2.72 billion. Investors are treating NFLX stock as a value firm instead of a growth one. That would compress its price-to-earnings ratio.
The 30% drop of South Korea’s KOSPI created panic for Sandisk (SNDK) shares. SNDK lost 12.6% on Thursday and is down by 40.07% from its 52-week high of $2,354.39. At a $1,411 closing price, Sandisk fell by nearly $1,000 a share.
Investors are not willing to price profit margin expansion for Sandisk, Micron (MU), Seagate (STX), or Western Digital (WDC). With the AI chatbot market saturated, markets are pricing in the risk that rising competition would cause an abrupt drop in capital expenditure.
Markets are also betting that Microsoft (MSFT) will sharply curtail its aggressive investment in OpenAI and AI hardware. In response, the stock traded above $400 for the first time in over a month.
Related Stories
