On Wednesday, shares of streaming titan Netflix lost more than one-third of their value, falling as much as 37 percent after the company issued its first-quarter earnings for 2022. The company reported that it lost 200,000 subscribers amid increasing challenges and growing competition. The company’s stock fell over 20 percent on its earnings reports and has continued to dip.
This makes it the first time the company would be losing subscribers in ten years and is also an indicator that the pandemic-induced boom it experienced last year is over. Netflix shares fell 37 percent to $220.40 and are expected to continue to fall as investors show fears for video streaming shares to come to the surface. The company is headed for its worst day in almost 18 years if it continues to incur losses.
Shares of other video streaming companies have also suffered a decline following Netflix’s first-quarter earnings report.
Various analysts have shared their opinions on Netflix. Let’s see what some of them have to say. In a Wednesday note, analysts at Bank of America wrote that “Although their plans to reaccelerate growth (limiting password sharing and an ad model) have merit, by their own admission they won’t have a noticeable impact until ’24, a long time to wait on what is now a ‘show me story’.” This is one out of many comments to look down on Netflix as a result of its disappointing report for the first quarter.
Doug Anmuth, a JP Morgan analyst said that “Near-term visibility is limited … and there’s not much to get excited about over the next few months beyond the new, much lower stock price.” He also halved his estimate for 2022 net subscriber additions to 8 million.
Bokeh Capital Partners’ Chief Investment Officer, Kim Forrest, added that “Netflix is a poster child for what happens to growth companies when they lose their growth. People buy growth companies because they think their cash flow is going to grow so they’re paying ahead for anticipating that. When a stock like this tumbles, people looking for growth back away quickly.”
“We’re left with a business in transition. Subscribers have slowed and we struggle to see a return to a pre-COVID net add cadence,” Piper Sandler analyst Thomas Champion said in a note.
Consumers canceled their Netflix subscriptions as a result of inflation and post-pandemic user fatigue, analysts said. Netflix blamed increasing competition, password sharing amongst households, and the ongoing Russia-Ukraine conflict for its woes.
Netflix has promised a global crackdown on password sharing and says that users who want to share their accounts will have to pay more in the future. But would this help remedy its losses and bring the company back on track?