Is the poor audience reception of Netflix's Squid Game Season 3 causing a drop in stock prices?

Netflix (NASDAQ: NFLX) reported impressive results for Q2, with both revenue and profit exceeding market expectations, prompting the company to raise its full-year guidance. However, the market's already high expectations led to a decline in the stock price after the earnings report, dropping over 4%. Netflix's revenue for the second quarter reached $11.08 billion, a year-over-year increase of 17.3%, slightly higher than the company's estimate of $11.04 billion. Earnings per share (EPS) was $7.19, above the expected $7.03, and significantly higher than last year's $4.88.

Netflix Q2 earnings report is impressive, with a price-to-earnings ratio of about 40 times.

Netflix has raised its full-year revenue forecast for 2025 to between $44.8 billion and $45.2 billion, up from the previous estimate of $43.5 billion to $44.5 billion. Netflix stated that this adjustment mainly reflects a weaker dollar, subscriber growth, and the continued rise of its advertising business.

Despite strong performance, investors did not show enthusiasm. William Blair analyst Ralph Schackart stated that Netflix's performance is good, but it is difficult to exceed the high expectations the market has already established for it. The company's stock price has accumulated over a 42% increase this year, with a price-to-earnings ratio of about 40 times, far exceeding the market level. The reason Netflix's stock price did not perform better despite good financial reports and instead declined is due to the poor reputation of Squid Game's third season? The following is an analysis report, purely market observation, and not any investment advice.

Does the poor audience ratings of Squid Game Season 3 affect the stock price?

In terms of content, the third season of Squid Game has officially launched, achieving over 150 million hours of viewing time globally in its first week, once again claiming the top spot in Netflix's global non-English series ranking. However, despite the astonishing viewership data, audience reception has not reached the standards of the first two seasons, and it can even be said that there has been a lot of criticism.

According to multiple review platforms, the third season of Squid Game has been criticized for its innovation in plot and character development, with many viewers stating that the pacing is sluggish, repetitive of previous formulas, and lacking surprises. Some critics believe this season resembles a replication of a successful formula rather than a breakthrough, and there has been a lot of backlash on social media. Viewers have heavily criticized the storyline for containing too many lengthy subplots and implausible events. In particular, the plot twist of "the baby becoming the winner" has faced strong skepticism, with some reviews stating that segment is "childish and illogical." However, despite mixed reviews, the show has effectively increased user engagement and stickiness on the platform. Co-CEO Greg Peters stated that overall user stickiness is good, and retention rates remain industry-leading.

The growth of the advertising business brings in revenue.

Netflix continues to develop its ad-supported plan, with the number of users for the built-in ad package at $7.99 per month surpassing 94 million, a significant increase from 70 million in November last year. The company expects ad revenue to reach $3 billion by 2025.

In addition, Netflix's content for the second half of the year will be quite rich, including the launch of new seasons of "Wednesday" and "Stranger Things," while also increasing live sports events and entertainment content, such as the NFL Christmas game, WWE Raw, and the anticipated introduction of UFC events, further enhancing the platform's advantages.

Netflix expects significant increases in content and marketing spending for the third and fourth quarters, but remains optimistic about profit growth year-on-year, with a full-year expectation of reaching 30%, higher than the previously anticipated 29%. Nevertheless, the market is still concerned about whether it can maintain profitability in the face of rising costs while continuing to drive user growth and revenue expansion.

This article discusses whether the poor audience reviews of Netflix's Squid Game Season 3 have caused a decline in stock prices. It first appeared in Chain News ABMedia.