Netflix stock drop drags TV shares down — The Information

Greetings!

Another day, another sale on the market. And things get a little random. Take today’s 5% to 7% drop in shares of Disney, Discovery and ViacomCBS, apparently caused by a 22% drop in the price of Netflix. It’s a bit like a teacher punishing an entire class for the misdeeds of one student. It makes little sense to punish TV stocks for Netflix’s sharply slowing growth. It may well be the competition from these companies – with their new streaming services – that is one of the factors weighing on Netflix’s growth.

To make matters worse, none of the three have enjoyed the incredible appreciation Netflix has seen in recent years — each valued well below the video streaming pioneer at multiples in revenue and profit. That makes sense, given that Netflix has grown at 20% to 40% per year for most of the past decade, while the TV companies have struggled with mostly single-digit percentages. But it’s Netflix’s valuation that should shrink as its growth rate slows, not the other companies.