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Business News/ Markets / Stock Markets/  Netflix tanks 37% on massive subscriber loss, heads for worst day in two decades
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Netflix tanks 37% on massive subscriber loss, heads for worst day in two decades

The S&P 500 gained for a second day, extending the biggest daily advance in a month.

Netflix traded as low as $244.95 at the open in New York, extending its plunge this year to 60% (Reuters)Premium
Netflix traded as low as $244.95 at the open in New York, extending its plunge this year to 60% (Reuters)

Netflix Inc shares lost over a third of their value on Wednesday after the company reported its first drop in subscribers in a decade, leaving Wall Street questioning its growth in the face of fierce competition and post-pandemic viewer fatigue.

The streaming pioneer's shares fell 37% to $220.40 and were headed for their worst day in nearly 18 years if the losses hold. More than a dozen analysts rushed to temper their views on a stock that has been a red-hot market performer in the past few years.

"Netflix is a poster child for what happens to growth companies when they lose their growth," said Kim Forrest, chief investment officer at Bokeh Capital Partners in Pittsburgh.

"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."

Brokerage J.P.Morgan made the most aggressive move by halving its price target to $305 - well below the stock's median Wall Street target of $400.

"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," J.P. Morgan analyst Doug Anmuth said.

Anmuth also slashed his estimate for 2022 net subscriber additions by half to 8 million.

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.

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 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. I

Fellow stay-at-home stocks, including Etsy Inc., Zoom Video Communications Inc. and DocuSign Inc. have also been hit by deep losses, down by 33% to 47% in 2022, as these businesses struggle to leverage the inroads they made during lockdowns.

The tech-heavy Nasdaq led Wall Street's main indexes higher for a second straight session on Wednesday, as easing Treasury yields and overall earnings optimism helped counter a plunge in the shares of streaming giant Netflix.

The Dow Jones Industrial Average rose 51.5 points, or 0.15%, at the open to 34,962.67.

The S&P 500 gained for a second day, extending the biggest daily advance in a month. The Nasdaq 100 added 0.2% as gains in big tech helped offset a selloff in Netflix Inc., which slumped 30% after reporting a drop in its subscriber base.

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Published: 20 Apr 2022, 07:07 PM IST
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