The streaming service shocked Wall Street by losing 200,000 customers in the first quarter.
Netflix Inc. plunged 39% on Wednesday, extending a sell-off that put it on track for a $60 billion drop in market value, after it reported a sharp drop in its subscriber base.
Netflix traded as low as $212.51 in New York, extending its decline this year to 64%, making it the worst-performing stock in the broad S&P 500 and Nasdaq 100 tech indices. Netflix has a weight of 0.7 % on the Nasdaq 100 and 0.3% on the S&P 500. The stock is on track for its biggest drop since October 2004 and is now worth less than $100 billion in market value.
The streaming service shocked Wall Street by losing 200,000 customers in the first quarter, the first time it has lost subscribers since 2011. It also projected it will drop by another 2 million customers in the second quarter.
“A big problem with Netflix is that it’s too easy to leave the service,” said Russ Mould, chief investment officer at AJ Bell. Consumers feeling the effects of inflation will take a hard look at their spending, and streaming services are a quick way to save money, he said.
The drop in customers has prompted Netflix to break some of its long-standing rules: It will introduce a cheaper, ad-supported option for subscribers in the next two years and begin cracking down on people who share their passwords even before that.
Netflix shares suffered this year as the pandemic-era surge in user sign-ups faded and investors turned away from high-value tech and growth stocks due to rising bond yields. .
Other stay-at-home stocks, including Etsy Inc., Zoom Video Communications Inc. and DocuSign Inc., have also been hit by deep losses, down from 38% to 51% in 2022, as these companies struggle to capitalize. the progress they have made. during lockdowns.
Long time bulls are great
Netflix stock has been a Wall Street favorite in recent years, with three out of four analysts covering the stock recommending a buy early in the year.
Now, even Wall Street bulls are switching sides after Netflix missed the most dovish forecasts, not just once, but twice in a row. Wall Street analysts lowered their price targets for the streaming video company, while at least nine brokerages downgraded the stock.
JPMorgan’s Douglas Anmuth, who removed his buy recommendation that he had held since 2013, said he was encouraged by the company’s intentions to create an advertising business, a model that has worked for Hulu and Disney+, but noted it was still in stages. initials.
With the downgrades, the streaming video company now has the lowest number of buy ratings since 2015, according to data compiled by Bloomberg.
(Updates the movement of the share price).
–With the assistance of Thyagaraju Adinarayan and Kit Rees.