Media companies still bruised from the great stock selloff earlier this month got beat up again on Thursday.
It was a generally rough day for markets, with the Nasdaq, the New York Stock Exchange and the Dow Industrial Average each dropping, but media companies appeared to be hardest hit.
The likes of 21st Century Fox, Time Warner, Disney and Viacom all took a shellacking amid investor anxiety about the long-term health of the television business. These concerns were inflamed this week after Sanford C. Bernstein analyst Todd Juenger wrote a blistering note that implied the cable and broadcast industries were in shambles. Cord-cutting will accelerate, ratings will erode and advertising is in a state of decline, he argued, all while downgrading Disney and Time Warner. Moreover, the fees that affiliates pay to air shows could also be at risk.
“When an industry is undergoing a massive structural upheaval, one major revenue stream is already impaired — and now there are signs the second one may be as well — investors won’t wait for final conclusive evidence to re-evaluate how much they are willing to pay for the existing status quo cash flow streams,” Juenger wrote.
Investors shared his pessimism, resulting in widespread carnage. Disney stock was down 5.97% in afternoon trading, Time Warner plunged 4.14%, Viacom dropped 5.22%, CBS Corp. slid 3.74%, Lionsgate fell 4.78%, DreamWorks Animation declined by 6.51% and Fox fell back 3.56%.
The bloodletting wasn’t consigned to old media — it was also a bad day for Netflix. The company behind “House of Cards” and “Orange Is the New Black” saw its stock fall as much as 8.8% in Thursday trading.
While Netflix shares have been notoriously volatile, the selloff is somewhat ironic: The streamer is at least partly responsible for the pummeling Disney, Time Warner and other media and entertainment stocks have taken, as Netflix’s rise has contributed to concerns over the health of the pay-TV sector by potentially siphoning off customers.
Netflix’s drop Thursday appeared to be “guilt by association with high-multiple stocks that have harder to fall when the market is in a downturn,” said Rosenblatt Securities equity research analyst Martin Pyykkonen, adding that there was no notable news that triggered the decline.
Forgive media players if they’re suffering from a sense of déjà vu. Two weeks ago, Disney’s acknowledgement that its popular ESPN sports channel had lost some subscribers spurred a downward spiral among media stocks that triggered widespread fears the pay-TV business was contracting at a more rapid rate than analysts had anticipated.
Todd Spangler contributed to this report.