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SAN FRANCISCO (AP) — Netflix's see-sawing stock plummeted nearly 11 percent Tuesday amid fresh concerns about the video subscription service's slowing U.S. growth and its ability to pay for enough compelling content to keep its customers satisfied.
THE SPARK: Bank of America Merrill Lynch downgraded Netflix shares, dampening the investor optimism that had been building during the past week after two other analysts had recommended buying the stock.
Those differences of opinion underscore the challenges and opportunities that have turned Netflix into one of the most hotly debated companies on Wall Street.
"It has become a real battleground stock," said Nick Gibbons of Gradient Analytics, a research firm that has a dim view of Netflix's prospects.
Netflix's stock surged 30 percent in the four previous trading sessions but the latest shift in sentiment wiped out a big chunk of that gain.
Netflix skeptics are convinced the company's heyday is over, its future dimmed partly by the rising cost of licensing Internet video. It is also trying to fend off tougher competition from the likes of Amazon.com Inc. and mend the damage from a price increase that alienated hundreds of thousands of U.S. subscribers last year.
The company's backers view Netflix's stock as a relative bargain, given that its market value has fallen by 75 percent from its peak about 15 month ago. Although Netflix may never be worth what it once was, some analysts and investors believe Netflix is doing a good job of stocking its Internet video library with a mix of original content and relatively low-cost TV series that have been previously aired.
These supporters also are convinced the competitive fears about Amazon are overblown. They see ample opportunity for Netflix to grow in the U.S. and overseas as the company expands its Internet video service in new markets.
THE BIG PICTURE: Investors will get a better handle on Netflix's performance Oct. 23 when the company is scheduled to report its third-quarter earnings. After those numbers come out, another wild swing in the stock would not be surprising. The company's shares have plunged by as much as 25 percent and soared by as much as 22 percent on the day after it issued its two previous earnings reports.
SHARE ACTION: Netflix's stock fell $7.99 to close at $65.53. The shares have ranged from $52.81 to $133.43 in the past year.