Stock Market Today, July 17: Netflix Plunges, but Are Investors Missing the Point?

Netflix (NASDAQ:NFLX), the global streaming entertainment and ad-supported video platform, closed at $68.95, down 7.26%. Guidance came in below Wall Street forecasts, and investors are watching near-term revenue and earnings growth.
Trading volume reached 141.0 million shares, coming in about 218% above its three-month average of 44.3 million shares. Netflix IPO'd in 2002 and has grown 57,531% since going public.

How the markets moved today

The S&P 500 (SNPINDEX:^GSPC) fell 1.01% to 7,458, and the Nasdaq Composite (NASDAQINDEX:^IXIC) dropped 1.40% to 25,520. Within entertainment streaming and subscription video services, Walt Disney (NYSE:DIS) closed at $97.67, down 2.05%, while Comcast (NASDAQ:CMCSA) ended at $23.79, down 1.29%, highlighting pressure across streaming peers.

What this means for investors

Netflix didn’t report a bad quarter. Revenue continues to grow by double-digits, and free cash flow is, well, flowing. That revenue growth, however, slowed to 13.4% year over year, the lowest level in over a year.

That is one focus for investors. Another is that the company will reduce its customer engagement data reporting to just once per year. That had investors bailing from the stock today.

The company’s growth rate is certainly slowing, but that’s a natural progression for a mature business like Netflix. The company is still a cash machine, too, though. Free cash flow was $1.5 billion, a decline from last year’s $2.3 billion due to higher cash tax payments.

Investors have rerated the stock, but I think the business fundamentals will gain a new slate of investors, making today’s drop a good long-term buy.

Howard Smith has positions in Netflix and Walt Disney. The Motley Fool has positions in and recommends Netflix and Walt Disney. The Motley Fool recommends Comcast. The Motley Fool has a disclosure policy.