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Netflix shares closed at more than 35% on Wednesday, after the streamer reported gains on Tuesday night showing that it had lost subscribers for the first time in more than 10 years. The poor results and outlook have led to a wave of downgrades on Wall Street due to fears about the company’s long-term growth potential. The decline has caused Netflix to cut more than $ 50 billion in market capitalization. It is now the worst performing stock of 2022 in the S&P 500, down 62.5% so far. Netflix said several headwinds are affecting growth, including increasing competition and lifting pandemic restrictions. The video streamer business has benefited from stay-at-home commands caused by coronavirus, many people are looking for digital entertainment. But in recent months, people have spent less time on digital platforms as vaccines have been launched and mandates have been simplified.
Reed Hastings, the founder of Netflix, speaks on stage at the New York Times Dealbook 2019 on November 6, 2019 in New York City. Michael Cohen | Getty Images
The slower growth of the broadband connection of the population also played a role in the company’s poor forecast. Netflix estimates that 100 million households share their subscription passwords with other family or friends. The company, in an effort to boost growth, said it was considering lower-priced advertising and suggested a crackdown on password sharing. And while analysts generally seemed optimistic about these changes, they noted that there was no short-term solution to the subscriber base problem. “Although their plans to accelerate growth (limiting password sharing and a pattern of advertisements) have merits, from their own recognition, they will not have a visible impact until 24, long to wait for what is now a” show me the story”. Bank of America analysts said in a statement Wednesday. The company was one of at least nine companies to downgrade Netflix based on the disappointing report.
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“After what can only be called a shocking first-quarter subscriber failure and poor financial and subscriber guidance, we have lowered our subscriber forecasts and substantially pushed our profitability forecasts,” wrote Pivotal analyst Jeffrey Wlodarczak. in a note on Tuesday. The company downgraded the stock to sell from the purchase. Wells Fargo analysts wrote in a note Wednesday that downgraded shares to an equal share that “in our view,” negative secondary growth and investment to boost revenue are the foot in the NFLX narrative coffin. “