Netflix Faces South Africa Price Probe, Putting Stock Under Pressure

Netflix Inc (NASDAQ:NFLX) stock traded lower by more than 2% on Tuesday as risk appetite softens across growth and media names.

The Nasdaq is down 0.20% while the S&P 500 has shed 0.44%, and Communication Services is also in the red (down 0.67%), keeping pressure on the group.

• Netflix stock is trending lower. What’s driving NFLX stock lower?

The U.S. streaming giant faces fresh regulatory scrutiny in South Africa as authorities examine the cost of digital media and communications services for consumers.

South Africa’s telecommunications regulator plans to investigate prices charged by so-called over-the-top service providers, including Netflix and Meta Platforms Inc.’s (NASDAQ:META) WhatsApp, Bloomberg reported on Monday, citing Business Day.

South Africa Reviews Digital Service Costs

The Independent Communications Authority of South Africa plans to assess what consumers pay for digital services as part of the inquiry, according to the report.

The regulator will separately investigate telecommunications-service costs, potentially affecting major operators including MTN Group Ltd., Vodacom Group Ltd., Telkom SA SOC Ltd. and Cell C Holdings Ltd.

South Africa’s telecommunications-service costs rank among the highest globally, according to the report.

Regulator Builds on Earlier Pricing Reviews

The inquiry follows previous regulatory reviews of data-service costs and monitoring of prices after authorities allocated high-speed internet spectrum and introduced measures aimed at increasing competition.

The latest move also follows an effort by South Africa’s communications minister to bring in experts to identify policies and other interventions that could lower consumer prices.

The planned review places Netflix and other digital-service providers under closer scrutiny as regulators examine the affordability of services delivered over telecommunications networks.

The regulator had not provided additional comment when Bloomberg sought a response outside normal business hours.

Analyst Consensus & Recent Actions: The stock carries a Buy rating with an average price forecast of $90.67. Recent analyst moves include:

• Wolfe Research: Outperform (Raises target to $95 on Aug. 25)
• Baird: Outperform (Lowers target to $90 on July 22)
• Morgan Stanley: Overweight (Lowers target to $83 on July 17)

Top ETF Exposure

• REX FANG & Innovation Equity Premium Income ETF (NASDAQ:FEPI): 6.86% Weight
• Global X PureCap MSCI Communication Services ETF (NYSE:GXPC): 4.55% Weight
• Pathfinder Focused Opportunities ETF (NASDAQ:PFOE): 4.72% Weight

Significance: Because Netflix carries such a heavy weight in these funds, any significant inflows or outflows for these ETFs will likely force automatic buying or selling of the stock.

NFLX Price Action

Netflix shares were down 2.28% at $76.47 at the time of publication on Tuesday, according to Benzinga Pro data.

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