Why Netflix Stock Lost 17% in June
Key Points
Netflix co-founder and longtime CEO Reed Hastings left the board at the beginning of the month.
Media outlets reported that the company had put in a bid for Roku and was interested in Lionsgate.
The stock is down more than 40% from a year ago as its valuation may have gotten stretched.
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Shares of Netflix (NASDAQ: NFLX) were drifting lower last month, continuing a broader pullback this year.
While there was no major news out on the leading streamer, skepticism about its business strategy at a time when its core markets are maturing seemed to push the stock lower.
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Semafor reported that the company had bid on Roku, which agreed to be acquired by Fox, and that it was interested in buying Lionsgate, following Warner Bros. Discovery's decision to sell itself to Paramount Skydance instead of Netflix.
Additionally, Reed Hastings, the co-founder and longtime CEO of the company, stepped down from the board at the beginning of the month. Hastings had announced that decision in April, but his departure may have influenced some investors, as he now has no official role in the company.
According to data from S&P Global Market Intelligence, the stock lost 17% last month. As you can see from the chart below, the stock was heading lower over most of the month.
NFLX data by YCharts
What happened with Netflix last month
Netflix kicked off the month by naming Jay Hoag as its new Chairman of the Board, replacing Reed Hastings. Hoag had been the board's lead independent director since 2012 and Netflix will no longer have a separate lead independent director, as Hoag is not an executive with the company.
After the Roku-Fox deal was announced, Semafor reported that Netflix had bid on Roku, though Netflix denied both making a formal bid for the streaming platform and that it was interest in acquiring Lionsgate, which seemed to represent table scraps after losing out on WBD.
Still, the Semafor report pushed the stock lower as it indicated that the company is searching for its next growth leg as subscriber growth slows in core markets like North America.
Other reports weighing on the stock included Meta Platforms' plans to expand Instagram TV and research firm M Science's noting that the company is on track for its weakest global net subscriber additions since 2022 in the second quarter.
Image source: Netflix.
What's next for Netflix
Netflix is now down more than 40% from its peak about a year ago, even though the business continues to deliver solid results.
Its valuation may have been inflated at the peak, but the stock looks like a good buy now at a price-to-earnings ratio around 30, excluding the $2.8 billion it received from WBD's breakup fee.
Slowing subscriber growth could present a challenge, but we'll learn more when the streaming stock reports second-quarter earnings next Thursday. Analysts are expecting revenue to grow 13.6% to $12.6 billion in the quarter and for earnings per share to improve from $0.72 to $0.79.
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Jeremy Bowman has positions in Meta Platforms, Netflix, and Roku. The Motley Fool has positions in and recommends Meta Platforms, Netflix, Roku, and Warner Bros. Discovery. The Motley Fool has a disclosure policy.
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