The stock market is ridiculous Part 2

I know I've said it before, but I'll say it again: the stock market is a ridiculous thing. The latest exhibit: Netflix's falling share price.

By most measures, Netflix is a hugely successful company. In the last calendar quarter alone, it made profits of US$1.6 billion on sales revenue of US$7.8 billion. Revenue was up 10% over the same period a year ago. If there ever was a strong, safe, profitable company, Netflix is it. 

However, the company's shares just took a 26% nose-dive, and the reason?: it lost about 200,000 subscribers during the quarter. For context, its subscriber base went down from 221.84 million to 221.64 million; that's a reduction of about 0.1%, by my calculation. For added context, it lost 700,000 subscribers when it deliberately closed down it operations in Russia over the war in Ukraine, so arguably it actually gained about 500,000 subscribers over the quarter.

But "analysts" - that amorphous, ill-defined group of geeks and wonks - were expecting an INCREASE in subscribers of 2.5 million and, when that didn't pan out, investors clearly felt morally obliged to panic sell, resulting in a 26% rout of the company's stock price in after-hours trading. 

Now, these people may wake up this morning and realize that they grossly overreacted. But that is just what the stock exchange does, isn't it? It overreacts. Constantly. You would think that, with the huge amounts of money on the line, investors would be a little more circumspect in their reactions to events. Instead, however, they crash about like a bull (or a bear) in a china shop, and market indices slew around crazily as a result. It all just seems so unnecessary.