Investors are always looking for bargains, but over the past several years, the Nasdaq Composite (NASDAQINDEX:^IXIC) hasn’t given them many opportunities to take advantage of price declines to buy stocks cheaply. Yet over the past month or so, Nasdaq investors have gotten an unusual opportunity to invest in many of their favorite stocks at huge discounts. On Thursday, the Nasdaq moved back into correction territory, falling more than 10% below its record highs from earlier this year. That included a roughly 0.5% move lower as of shortly before 2:30 p.m. EDT.
Some of the stocks that did the best during the worst part of the COVID-19 pandemic in 2020 have seen significant pullbacks lately. On Thursday, those names included Netflix (NASDAQ:NFLX) and Match Group (NASDAQ:MTCH), both of which fell more than 4% in mid-afternoon trading. Below, we’ll take a look at these two powerhouses of their respective industries and see what’s driving investors to take a less optimistic view of their prospects.
Looking to stay ahead of the competition
Netflix had an explosion in growth during the beginning of the pandemic, as people stuck at home for extended periods of time looked desperately for entertainment options. However, as the pandemic comes under control and people return to other pursuits, some investors fear that Netflix will see an inevitable slowdown.
Investors also need to consider the much more extensive competition that Netflix now has in video streaming. A host of other providers now offer their own rival services, often populating their offerings with proprietary content that Netflix no longer can access. Netflix has continued to ramp up its own content production in order to ensure a steady flow of hit shows to keep viewers interested, but that’s proven to be costly, and the company warned investors that they could expect free cash flow to decline as Netflix started spending more on production in 2021.
Netflix is even looking at changing viewer behavior. After having initially encouraged binge-watching of entire seasons of hit shows, Netflix is now experimenting with longer release schedules that mimic the way old-fashioned broadcast television used to make new episodes available to the public.
None of this points to Netflix losing its leadership role in the immediate future. However, investors appear to be hedging their bets on the stock continuing its meteoric rise from the past year.
Making a Match
Meanwhile, Match Group is facing its own set of challenges. The online dating company behind the popular Tinder service has seen its stock drop almost 25% since early February as investors weigh whether Match can remain as dominant as it has been in past years.
New entrants to the space are one reason why some Match Group investors are taking pause. Bumble (NASDAQ:BMBL) recently became public with a different spin on the online dating scene, offering women an alternative that’s tailored more to their preferences.
Moreover, Match has made an ambitious strategic move that could put it into direct conflict with a wider range of rivals. The purchase of South Korea’s Hyperconnect gives Match a social media presence in the Asia-Pacific region, with the idea of pursuing the growing trend of social discovery to find like-minded friends.
Expanding Match’s addressable market is a smart move for the online dating specialist. However, it also ups the stakes for the company to keep up its search for new growth opportunities. Just as Netflix has to keep proving itself in streaming video, so too will Match need to deliver on all of its promising ideas in order to satisfy its shareholders in the long run.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.