Netflix’s stock drops 35% on Wednesday after the streaming service revealed a drop in members in the most recent quarter.
As a result, the company’s market capitalization dropped by more than $50 billion. As a result of the poor report, at least nine Wall Street firms have downgraded the stock.
Netflix’s stock drops 35% on Wednesday after the streaming service announced earnings Tuesday evening. That revealed it had lost members for the first time in more than a decade. Wall Street downgraded the firm due to the results and the lackluster outlook. Citing concerns about the company’s long-term growth potential.
According to the company, several obstacles affect Netflix’s growth, including increased competition and the loosening of pandemic limitations. Coronavirus-related stay-at-home orders boosted the video streamer’s profitability as more customers sought digital entertainment. However, as vaccines have been more widely available and restrictions have become less stringent. People have spent less time on digital platforms in recent months.
The company’s poor projection was also influence by slower household broadband growth.
According to Netflix, 100 million households share their subscription credentials with other family members or acquaintances. The company said it’s mulling a lower-cost ad-supported tier and hinted at a password-sharing crackdown to promote growth. However, while analysts were generally optimistic about the revisions, they cautioned that they were not a quick fix for the subscriber problem.
“While their plans to reaccelerate growth (password sharing restrictions and an ad model) have validity. They won’t have a visible impact until ’24,’ a long time to wait on what is now a show me a tale,'” Bank of America analysts wrote in a note on Wednesday.
At least nine firms downgraded Netflix due to the dismal report.
“We cut our subscriber projections and pushed back our profitability forecasts substantially. After what can only be describe as a catastrophic 1Q subscriber shortfall and dismal subscriber & financial outlook,” Pivotal analyst Jeffrey Wlodarczak wrote in a Tuesday note. As a result, the business lowered the stock from buy to sell.