Shares of us company Netflix tumbled to a six-month low. Record the sale of securities of the company experts associated with the outflow of its client audience. Amid growing financial problems, the service was forced to increase subscription fee, which triggered a mass Exodus of subscribers. The collapse of the securities analysts believe Netflix is a negative signal for the giants of American industry — Facebook, Apple, Amazon and Google. What can happen to the shares of the technological leaders USA at RT.

Thursday, July 19, trades on the us stock market opened with decline in share prices of technology companies. The corresponding index NASDAQ has decreased on 0,25%, to 7871 of the item.

Sale of securities in the IT industry in the USA continues for several consecutive days. While investors ‘ attention focused on the situation around one of the major players in the technology sector of the States is Netflix.

On the eve of the company’s stock price has fallen by 12%, and at auction Thursday additionally decreased by 11% to us $322 per share. The value was the lowest since Jan 2019. In less than a day, the company lost about $16 billion

According to experts, in many respects, an adverse market reaction provoked quarterly reports streaming service. As follows from the document, from April to June, the number of paid subscribers of Netflix in the United States decreased by 126 thousand. The outflow of American viewers was the first time in the last eight years. At the same time the increase of the global audience was almost twice below the company’s forecasts and amounted to only 2.7 million people, against the expected 5 million
The decrease in the user base of the American provider of Internet TV is due to steadily increasing competition in the market. This opinion in an interview with RT expressed by the expert of the Academy of management Finance and investment Gennady Nikolaev.

“The big impact has a number of competitors such as Amazon or HBO. Soon on the market should leave Disney and Apple, which could significantly reduce the revenue of Netflix. Actually this is already happening: the two most popular U.S. TV series “Friends” and “the Office” in the next two years will go from platform to competitors AT&T (which owns HBO) and NBC”, — said Nikolaev.

Interestingly, the collapse of Netflix stock takes place simultaneously with the completion of the court case against Kevin spacey about the harassment. According to CBS, on July 17, U.S. prosecutors withdrew the charges against the famous Hollywood actor in the absence of access to the evidence. Earlier, two-time winner of the award “Oscar” was trying to expose crimes of a sexual nature, then Netflix broke a contract with him.

As noted in an interview with RT Deputy Chairman of the management Board of CB “LOKO-Bank” Andrey lyushin, the incident is a scandal added to the problems of the company, but not completely shattered ratings service. Analysts believe that the main reason for the departure of the viewers has become more expensive subscription fees. The increase in subscription prices experts explain the financial problems of the organization and no payback business.

“Risks to the financial stability of the company is quite high. The enterprise has a large debt load — a debt twice that of equity. The market turns over $10 billion in bond Netflix with a speculative rating,” — said in an interview with RT expert on international markets “BCS” Oksana Kholodenko.

“Because of the cost of creating content the company consistently really spends more than it earns”, — the expert added.

According to her, in terms of increasing competition in the market streaming services will struggle to increase the subscription price and actively to attract new customers.

Chain reaction

Netflix is among the five largest and most successful technology companies in the U.S. along with Facebook, Amazon, Apple and Google. Traditionally, investors are referred to this group of organizations using the acronym FAANG, and are focused on making our assessment of the overall situation in the American IT sector.

As told in an interview with RT expert of “international financial center” Gaydar Hasanov, the fall of Netflix stock was the signal for market participants to sell securities of the other four companies. According to the analyst, the situation will put pressure on the whole group FAANG in the near future.

At the opening of trading on 18 July, shares of Facebook fell by 0.3%, Amazon — 0.7%, Google (which owns Google Inc.) — on 0,34%, and only paper Apple showed a slight increase to 0.67%.

Estimated Hasanov, on the background of emerging concerns about companies in the IT-sector investors generally appreciate the possibility of technical recession in all of the US stock market in the near future.

“After the indexes are important psychological levels, markets usually move into a phase of significant correction. July 15, S&P500 updated its historical maximum and reached the mark of 3,000 points. This is an important psychological level, which is putting pressure on many market participants, and hints at the relative overheating of the market”, — said Hasanov.

According to him, the concerns of investors also caused by the situation in the American market, treasuries (government securities of the country). To date, government bond yields of States with a maturity of ten years is 2.07% and remains lower than that of government securities with a maturity of three months (or 2.1%). This trend usually develops shortly before the start of the downturn in the economy and in recent times occurred in 2007.

Moreover, as emphasized by Gennady Nikolayev, the last time Facebook and Google have faced increased regulatory oversight by the us financial authorities. While, as expected, Amazon on the market online shopping may soon oust rival Walmart. Against this background, according to analysts, securities FAANG can additionally drop in the near future.

“After the failure of the end of 2018, shares of tech companies has significantly recovered and became the leader of growth this year. However, on the agenda of possible regulatory issues associated with the essentially monopolistic position, Facebook, Google, Amazon and Apple. The shares of these companies grew stronger than the major indices. So, if you combine regulatory risks and the possibility of starting mid-term correction in the US market, it looks logical failure of the new securities group FAANG in the foreseeable future”, — concluded Oksana Kholodenko.

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