Having had a night to sleep on Wednesday’s release of the minutes from the most recent FOMC meeting, traders continued to sell stocks on Thursday. In fact, they picked up the pace, with today’s 2.11% tumble from the S&P 500 being the biggest single-day setback since late June.
It was even worse for shareholders of Netflix, Inc. (NASDAQ:NFLX), Tesla Motors Inc. (NASDAQ:TSLA) and Walt Disney Co. (NYSE:DIS), though. Here’s why.
Netflix (NFLX)
Granted, it took a couple days for investors to decide if the news was good or bad, and an overbought stock against a backdrop a falling market may have nudged the stock in a bearish direction. But, shares of Netflix plunged on Thursday after the company announced this week it would be spending heavily on another series, and would attempt to offset that cost with higher prices in select markets.
The new series will be about Queen Elizabeth II. To be shot in the United Kingdom, NFLX has budgeted $100 million towards production. A total of 60 episodes are expected.
To offset some of the added production expense, Netflix will by upping its price for European customers from €8.99 to €9.99 per month. Perhaps fearing the same kind of (albeit modest) pushback experienced when it raised U.S. prices in early 2014 though, NFLX shareholders are increasingly concerned the company may be setting itself up for disappointing bottom-line results. The stock closed more than 8% lower today.
Walt Disney (DIS)
An already miserable month for Walt Disney shareholders turned even worse on Thursday following a key downgrade from Bernstein Research.
The pullback from DIS shares started on August 5th following what could only be described as an alarming second quarter and an equally alarming outlook. Already down 12% from its early August peak, DIS fell another 6% on Thursday after Bernstein Research’s Todd Juenger lowered his opinion on Walt Disney from outperform to market-perform.
“We believe the U.S. television industry is entering a period of prolonged structural decline, caused by a migration of viewers from ad-supported platforms to non-ad-supported, or less-ad-supported platforms. We favor companies that have the least exposure to U.S. advertising, the most exposure to sports, and advantaged positions internationally. But we fear the entire sector will struggle to work until the content owners take concerted action to reclaim on-demand viewing from the SVOD services and use it to protect affiliate fees.”
Tesla Motors (TSLA)
Last but not least, Tesla Motors couldn’t have found a more inopportune time to raise money by issuing stock.
All told, the maker of ultra-cool electric vehicles pocketed $738 million on Wednesday through a secondary offering of TSLA stock that came right in the midst of the biggest two-day selloff investors have seen in months.
The ill effects of that dilution, however, were exacerbated by an inordinate number of reports this week suggesting rival car companies were readying their own electric vehicles to take on Tesla. Among those automobile manufacturers were Audi, Mercedes, and perhaps BMW as well.
TSLA finished the day down nearly 6%.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
