Netflix shares fell more than 30 percent early Wednesday after the streaming company reported a drop in subscribers for the first time in a decade.
About 15 minutes into trading, shares were down 32.4 percent at $235.76 in the first session since the company's earnings report was released after the market closed on Tuesday, according to AFP
The Wednesday's disaster extended a selloff that has set it on course for a $46 billion wipeout in market value, after it reported a sharp decline in its subscriber base.
According to Bloomberg, Netflix traded as low as $232.36 in New York, extending its plunge this year to 60% -- making the worst performing stock in the broad S&P 500 and the tech-heavy Nasdaq 100 indexes.
Netflix has a 0.8% weighting on the Nasdaq 100 and 0.3% on the S&P 500.
The streaming service shocked Wall Street by losing 200,000 customers in the first quarter, the first time it has shed subscribers since 2011. It also projected it will shrink 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, investment director at AJ Bell. Consumers feeling the pinch from inflation will be looking hard at their expenses and streaming services are a quick way to save money, he said.
The drop in customers has led Netflix to break some of its long-standing rules: it will introduce a cheaper, advertising-supported option for subscribers in the next couple of years and will start to crack down on people sharing their passwords even before that.
Netflix’s stock has suffered this year as the pandemic-era surge in user sign-ups faded and investors have turned away from high-value technology and growth stocks due to rising bond yields.
Netflix’s stock has been a Wall Street darling in recent years, with three out of every four analysts covering the stock recommending a buy at the start of the year.
Now, even Wall Street bulls are flipping sides after Netflix missed even the most-bearish forecasts, not just once, but twice in a row. Analysts across Wall Street slashed their price targets for the streaming-video company, while at least nine brokerages downgraded the stock.
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JPMorgan’s Douglas Anmuth, who cuts his buy recommendation that he had maintained since 2013, said he was encouraged by the company’s intentions of creating an ad business -- a model that has worked for Hulu and Disney+ -- but noted that it was still in early stages.
With the downgrades, the streaming-video company now has the lowest number of buy ratings since 2015, according to data compiled by Bloomberg.
