Netflix sees $54 billion in market cap erased after losing subscribers for the first time in 10 years and forecasting more bleeding
Netflixstock sank 35% on Wednesday after issuing a disappointing update on its subscribership.
- The company said it lost 200,000 subscribers in the first quarter and expects to lose another 2 million its current quarter.
Netflix stock sank Wednesday, giving up more than a third of its value after the streaming service posted its first loss in subscribers in a decade.
After the market close on Tuesday, the company said it lost 200,000 subscribers in its first quarter, marking the first decline since 2011.
Shares plummeted 35% to end at $226.19, hitting its weakest price since December 2017 and shaving off $54 billion in market capitalization. Ahead of the quarterly report, Netflix stock had already lost about 40% this year.
Its subscriber outlook was bleak, as well, as the company forecast a loss of another 2 million in its current quarter.
Netflix's update pulled down shares of Disney and other streaming services. Disney, which runs the Disney+ service that includes Hulu, dropped 5.6%. Analysts rushed in Wednesday to downgrade Netflix. Among the cuts, JPMorgan downgraded its rating to neutral from overweight and halved its price target to $300 after Netflix experienced a "sea change" of a first quarter.
The company whose recent hits include "Bridgerton" and "Inventing Anna" also said in the near term, it's not growing revenue as fast as it would like.
"COVID clouded the picture by significantly increasing our growth in 2020, leading us to believe that most of our slowing growth in 2021 was due to the COVID pull forward. Now, we believe there are four main inter-related factors at work," the company said in its earnings statement.
The four factors the company cited for its performance in the quarter include:
- Growth being dependent on factors "we don't control." The company cited the adoption of connected smart TVs as an example.
- Estimates that Netflix logins are being shared across 100 million households.
- Huge competition, particularly in the last three years as major media brands launch their own streaming services.
- Macro factors. The company cited a sluggish economy, high inflation, and the war in Ukraine as having an impact on business.
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