What happened

Friday was a tough day for the broader market, but a terrible session for a handful of stocks in the streaming industry. Leader netflix (NASDAQ:NFLX) led the charge, losing nearly 22% on alarming news about its likely subscriber growth. Share of other streaming industry cohorts Roku (NASDAQ: ROKU) also fell more than 9% on Friday, as investors extrapolated news from Netflix. Even outfits like cable content providers AMC Networks (NASDAQ: AMCX) and Discovery (NASDAQ: DISC.A) (NASDAQ: DISC), (NASDAQ: DISC B) with fuboTV (NYSE: FUBO) have fallen more than most today, found guilty by mere association with Netflix’s business model.

So what

It could have been worse. Netflix managed to add an additional 8.28 million subscribers to its customer list in the three months to December, narrowly missing its guidance by around 200,000 people. Its outlook for the current quarter, however, is more discouraging. Netflix says it expects net additions of 2.5 million customers for the period ending March, well below the consensus estimate of 6.26 million that the analyst community was modeling. The figure suggested by the company is also a marked slowdown from the 4 million paid subscribers it added in the first quarter of 2021. Another price increase is also expected. The stock recorded its biggest one-day loss since 2012.

In many ways, however, Netflix’s disappointing numbers aren’t just about Netflix. They also serve as something of an indictment for the entire streaming industry, up to and including names that aren’t just premium streaming companies.

Case in point: Roku’s streaming receiver business is still strong, but its stock has fallen 9%. FuboTV was down 9.4% today as a streaming cable TV platform. Although they are still cable television production studios, AMC Networks and Discovery are also creating direct-to-consumer products that could eventually eliminate the need for cable companies. Discovery now has 20 million streaming subscribers, and its stock fell almost 5% today. Shares of AMC Networks fell 7.6% on Friday, apparently punished for its 9 million streaming subscribers.

Now what

And here’s the catch. How do you distinguish between instinctive selling that is only caused by the collapse of a peer stock and legitimate weakness? Along the same lines, can an investor reasonably expect an individual stock to rebound easily from this type of sell-off, even if the rationale for the sell-off was never particularly strong?

The answer to the second question is no – when salespeople are this inflexible, it’s better not to stand in their way until it’s clear that the rout has run its course. Corrections born out of a herd mentality usually end the same way. But like any real animal stampede, once a group-wide sale begins, it’s hard to stop. What appears to be the start of a market-wide correction only reinforces the short-term bearish scenario.

For patient investors looking ahead, these selloffs are ultimately buying opportunities.

The fact that Netflix’s tepid subscriber growth can at least be partially attributed to the kind of growth Discovery, AMC Networks and even Roku are realizing, now that Roku operates its own ad-supported streaming channel, is largely overlooked right now. . . Consumers are finding more specialized and/or free streaming content options, creating personalized competition that mainstream Netflix has never really faced. The tricky part will just be letting those other stocks continue to fall until a clear bottom is reached.