Streaming Stocks Like Spotify, Tencent and Netflix Are Getting Slammed. Why?

Streaming companies might not be dying from a thousand cuts, but each tiny wound isn’t helping Wall Street’s opinion of them. A steady drip of news reports and analyst downgrades have eroded billions of dollars from streaming companies’ market value in the third quarter. One day a main competitor is bundled with smartphones and mobile service, the next, a new entrant to video subscriptions pays an ungodly sum of money for an exclusive license to a TV show.

But the week’s drubbing wasn’t a new development. Since the beginning of August, the day after the company’s second-quarter earnings were released, Spotify shares have fallen 27.6%, knocking $7.7 billion from its market value. Nearly the entire decline came in the last 12 trading days dating back to Sept. 12. Streaming companies are losing value as competitive pressures have heated up in 2019.

Tencent Music Entertainment has different problems. Chinese antitrust authorities are investigating the company’s exclusive licensing deals with the three major music groups, Universal Music Group, Sony Music and Warner Music Group. Tencent Music has a side business that provides white-label licensing to third parties, and authorities are determining whether the prices it charges amount to anti-competitive behavior. Outside of government intervention, Tencent Music has relatively few issues.

Yet Netflix shares have fallen 26.2% through Monday since releasing disappointing growth numbers on July 17. Lower-than-expected subscriber growth in the second quarter sent Netflix shares down more than 10%. The company blamed the shortfall on weak original content and customer defections due to a price increase, and doesn’t believe competition was a factor.

Rippey, who gives Spotify an “underperform” rating, sees parallels in the wearables and consumer-hardware categories. “So long as you have the largest tech players in a market,” he says, “these products aren’t able to drive attractive margins.” On June 24, Rippey lowered his price target from $125 to $110 -- the lowest on Wall Street -- while Spotify was still trading at $150.

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