Key Takeaways:
Netflix shares dropped 24% since its April earnings report, the longest losing streak since November 2022, as Amazon's streaming push intensifies competition.
"With Amazon leaning into Prime Video and YouTube also competing for more time spent, this is raising more questions on both Netflix engagement and long-term pricing power," Justin Patterson, an analyst at KeyBanc Capital Markets, said.
The stock closed lower for eight consecutive sessions through Wednesday, erasing gains from a first-quarter earnings beat that saw profit exceed expectations. Netflix maintained its full-year forecast of $50.7 billion to $51.7 billion in revenue and a 31.5 percent operating margin, disappointing investors who had expected an upgrade after the Q1 outperformance. Shares fell almost 10 percent in the session immediately following the April earnings release.
The selloff reflects growing concern that Netflix's dominance faces its most credible challenge yet from Amazon, which bundles Prime Video with its e-commerce subscription and offers more live sports. Netflix is fighting back with live events including NFL Christmas Day games and boxing matches, but investors are questioning whether its pricing power can hold.
Patterson said Amazon's streaming service holds structural advantages that Netflix cannot easily replicate. Prime Video is bundled with the broader Amazon Prime membership, making consumers less sensitive to its cost. Amazon also offers more live sports programming and has a more established advertising-technology stack that draws on data from its retail customers. In its most recent earnings call, Amazon said it viewed its streaming offering as an important driver of new Prime member sign-ups and that the video business was "large and profitable in its own right."
Netflix has historically had the best customer-retention rates among streaming platforms, according to data firm Antenna, suggesting its standalone pricing has not been a barrier to keeping subscribers. The company is expanding into live television events, including the World Baseball Classic and the 2024 Mike Tyson versus Jake Paul boxing match, while leveraging artificial intelligence to improve content recommendations and production efficiency.
Patterson noted that investor unease about Amazon's threat has historically coincided with periods when Netflix is between releases of its top series. "As Netflix's content slate ramps up again, we suspect this concern moderates once again," he said.
The 24 percent decline puts Netflix shares at their lowest since late 2024, testing support levels not seen in more than a year. The company's next major catalyst will be its second-quarter earnings report, expected in July, where investors will look for signs that subscriber growth and pricing power remain intact.
This article is for informational purposes only and does not constitute investment advice.
