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Once a high-growth stock, Netflix (NASDAQ:NFLX) is going through a difficult period. After losing subscribers, it has a lot to work on. Consequently, NFLX stock has seen a massive dip over the past six months. The stock was once as high as $700 and is now down to $195. It lost more than 70% of its value over the past six months and I believe the dip will continue.
While the company saw the highest subscriber additions in 2020, it saw the highest dip in 2021. Investors are not happy with the quarterly results and there is an overall negative sentiment around the business. This will continue to impact NFLX stock throughout the year.
The Problems of Content and Competition
Netflix has shown exponential growth over the past decade and was at the top of the streaming industry. But the loss of 200,000 subscribers in the first quarter is a sign that the company is doing something wrong.
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This was the first drop in subscribers in a decade, and not something investors expected. It is believed the company will lose another 2 million in the current quarter.
There was a time when there was less or no competition for Netflix, and this is when it thrived. The only other option was traditional cable TV, and users were happy to do away with that. But now, there is ample competition in the industry and a price war.
Viewers have endless choices, and the only way Netflix can set itself apart is through content. This is what drew subscribers in the past, but the rising competition has made it hard for Netflix to stand out. Rising prices haven’t helped the company, either. It has driven users to different platforms.
The company will have to spend heavily on content and produce great shows to attract subscribers. It can become expensive to work with top directors and producers, and Netflix will have to carefully plan out its programming since rivals are looking to do the same. If the members are not growing, the company will not have positive cash flow and this will hamper the content development budget.
The Bottom Line on NFLX Stock
Netflix has the opportunity, but there is a lot of uncertainty surrounding the business. It will not be easy for the company to gain subscribers and investors. It will have to improve several factors, including its content, and a quick fix won’t work. My InvestorPlace colleague Patrick Sanders shares the same opinion about NFLX stock.
Investors who bought it before the pandemic had a chance to make the most of the benefits, but now is not the time to put your money in NFLX stock. The company needs a lot of work and it will take some time before we see its shares soaring. Until then, it might not hit all-time highs anytime this year and there could be a further dip.
On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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