‘Fast Money’ traders talk Netflix shares dropping after Elon Musk tells people to cancel

Elon Musk Criticizes Netflix: What Investors Should Know About Potential Business Impact

Imagine if your favorite sports team had a few fans booing from the stands, but the stadium was still packed with cheering supporters. That’s kind of what’s happening with Netflix right now, and it matters for anyone who invests money in big companies.

What Happened With Netflix?

This week, Elon Musk, a famous tech billionaire, told his followers to cancel their Netflix subscriptions. He was upset about an old cartoon on Netflix with a transgender character. Some other people online joined in, saying Netflix was pushing ideas they didn’t like.

The show at the center of this is called “Dead End: Paranormal Park,” which was actually canceled by Netflix back in 2023. The creator, Hamish Steele, said he was surprised by all the attention and defended the show as being about kind characters.

Some activists also started saying Netflix was unfair to certain groups of people, and called for a boycott — which means asking people to stop using Netflix to send a message.

Why Investors Should Care

When big names like Elon Musk speak out against a company, it can spook investors and make stock prices jump around. If enough people cancel their subscriptions, it could hurt Netflix’s profits. But is this likely to happen?

The Bull Case: Why Netflix Might Be Fine

  • Huge Subscriber Base: Netflix had over 301 million subscribers at the end of 2024, according to their last report. That’s a lot of people! (Source)
  • Strong Stock Performance: Netflix’s stock was up more than 60% in the past year, showing investors still believe in the company.
  • Short-Lived Backlash: Experts say this kind of boycott usually doesn’t last long. Most people keep watching their favorite shows.
  • Other Revenue Streams: Netflix is also making more money from ads, which helps balance out any lost subscribers.

The Bear Case: What Could Go Wrong

  • Negative Headlines: When famous people speak out, it can make investors nervous and cause the stock price to dip in the short term. Netflix shares fell about 5% this week.
  • Boycott Risk: In the past, some boycotts have hurt companies. For example, Bud Light lost a lot of sales after a similar controversy in 2023.
  • Political Pressure: If enough people get upset, it could push Netflix to change what kinds of shows it makes or how it runs its business.
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What History Tells Us

Boycotts like this have happened before. Sometimes they make a big splash, but often they fizzle out. For example, the Bud Light boycott had a huge impact on sales, but most other boycotts don’t change much over time. A study from the National Bureau of Economic Research found that most consumer boycotts don’t significantly hurt large companies unless they stick around for a long time.

Investor Takeaway

  • Don’t panic over headlines: Short-term drama can cause stock prices to bounce, but it rarely changes the long-term story for big companies like Netflix.
  • Watch for real numbers: Keep an eye on how many people actually cancel their subscriptions and what Netflix reports in its next earnings call.
  • Diversify your portfolio: Don’t put all your eggs in one basket. Having stocks from different sectors can protect you from sudden drops.
  • Look for patterns, not just noise: Only take action if you see a lasting trend, not just a loud week on social media.
  • Remember the big picture: Netflix is still a giant in streaming, and most experts aren’t worried about a lasting impact from this week’s controversy.

For the full original report, see CNBC

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