I am a chronic worrier.
I worry about everything, from the clothes I wear to class, to the weather, to whether or not I prepared enough for my upcoming midterms. Everything.
As an investor, there is a healthy amount of worrying that can prompt extra research and analysis into a stock. But worrying also causes investors to make hasty, impulsive decisions.
Now this must beg the question: how much of stock volatility is legitimate and how much is simply investor’s getting cold feet?
Well, this week, Netflix experienced its own version of this phenomenon, as fears resulted in a loss of about 12%.
According to Motley Fool, this loss is due to an overall loss in the S&P 500 last week. Rising interest rates have made bonds seem like a safer investment, and hence many investors are hesitant to put their money into the market, especially in riskier investments such as Netflix. Motley Fool also notes that this loss can be attributed to apprehension ahead of third quarter earnings reports coming out in the next few weeks. Netflix missed its mark with subscribers and had poor PR last quarter with their advertisements fiasco and are looking for a strong bounce back this quarter.
While this bearish view could be result in short term losses, Goldman analysts have a different view. Analysts are confident ahead of this quarters earnings reports, stating that Netflix will exceed expectations of 26.5 million subscribers and instead land close to 30 million.
Their optimism stems from three points: mobile growth possibilities, content spending, and higher quality products. These have lead Goldman analysts to be even more bearish on Netflix, despite apparent concern among other analysts.
This is a lot to process. In the wake of rising interest rates and a booming economy, investors continue to ask one question: when will the market correct?
As an inexperienced investor myself, I don’t have a definitive answer for this future or for Netflix’s. I can see how both Motley and Goldman’s analysts have validity, but I am not sure which is more correct in the current market. I know that there is a correction looming, but I’m struggling to decide whether to enter the market now and continue to ride this 9.5 year bull market or to wait for the correction and get in at a lower cost.
I’m sure this a struggle that most investors face.
How will Netflix react to this loss in market cap? I’m not really sure of that either. I think their quarterly results will either quell investors’ fears or aggravate them. As a blue-chip stock, Netflix is always under scrutiny, and even the smallest change or doubt can cause the nervous investor to sell out and shift the market.
But for now, I will continue to do what I do best: worry.
Enjoy the week ladies and gents. See you on the other side.