Hollywood Stocks Open Lower After China Market Crash, Netflix Rises as Service Goes Global
Apple is among the big decliners, dropping below the $100 mark.
Netflix shares rose in early Thursday trading after its late Wednesday announcement that it had launched in 130 additional international markets.
As of 9:45 a.m. ET, the stock was up 2.6 percent at $120.73 after dropping early this year. It had ended 2015 as the biggest gainer of the year in the broad-based S&P 500 stock index.
Other entertainment industry stocks opened lower early Thursday as the broader market slumped following the latest crash in China that also hit markets across Asia and Europe.
As of 9:45 a.m. ET, the S&P 500 was down 1.4 percent. Among Hollywood stocks that traded lower were CBS Corp. (down 2.4 percent), 21st Century Fox (down 1.5 percent), Lionsgate (down 1.5 percent), Time Warner (down 1.3 percent) and Viacom (down 1.1 percent) and Walt Disney (down 0.5 percent).
DreamWorks Animation's stock fell 1.9 percent in early trading. AMC Networks and Discovery Networks shares were down 1.7 percent, exceeding the broader market drop, but Starz's stock was down only 0.5 percent.
Tech giant Apple saw its stock drop below the $100 mark in early trading, falling 2.1 percent to $98.62. Concerns about the economic and consumer spending outlook in China affects Apple given the country is a big market.
Netflix's global launches drew commentary from analysts overnight.
Morgan Stanley analyst Benjamin Swinburne maintained his “overweight” rating on the stock. “Flipping the switch on all international markets ex-China creates the potential for international net adds upside in early 2016,” he wrote in a report. “That upside is important as we believe the market may be optimistic on U.S. net adds given price increases in the second quarter. Our ‘overweight’ thesis hinges on international upside overwhelming U.S. deceleration.”
He also discussed guidance for 2016 international contribution losses by Netflix’s CFO at a conference on Wednesday, saying it was “lower than expected” at roughly $120 million per quarter, or $480 million for the year. His previous estimate called for international losses of $540 million. His updated forecast calls for the international segment to reach break-even during 2017.
"We believe that the company’s $50 billion market capitalization remains low relative to the global growth opportunity presented by the Netflix consumer value proposition," wrote Guggenheim Partners analyst Michael Morris in another note to investors.
His prior full-year loss estimate was only $360 million, so he lowered his 2016 earnings per share estimate to 13 cents from 19 cents, "primarily reflecting higher anticipated investment internationally."
But he concluded: "We maintain our strong conviction in the Netflix operating model and the virtuous cycle that the company's technology has built with consumers and content creators relative to the traditional channels model. Competition, access to content, and consumer acceptance remain risks, particularly given high current valuation. However, we still see shares as attractive relative to their unique and growing business model."
Morris has a “buy” rating and $160 price target on the stock.
Jeffferies analyst Brian Fitzgerald on Thursday maintained his $105 price target and "hold" rating on Netflix's stock.
"Content creation is becoming more of a central theme for Netflix as they are able to 'take risks' that linear TV cannot," he wrote. Netflix is planning on 31 new and returning original series, two dozen original feature films and documentaries and 30 original kids series in 2016.