Netflix shares have fallen for the second time this year after the company disappointed investors
Shares of Netflix Inc. were in for their worst day in nearly a decade, when the streaming giant reported it had lost subscribers in the first quarter.
Shares dropped a quarter of their value in premarket trading on Wednesday. Investors expected the company to add new users in the first quarter. Instead, Netflix said it ended the first three months of the year with 200,000 fewer subscribers than in the fourth quarter and said it expected to lose two million global subscribers in the current quarter.
If the 26% drop in premarket trading happens later in the day, it would set Netflix on course for its biggest daily share price drop in nearly a decade. According to FactSet, the drop would slash nearly $40 billion of its market capitalization, up from $157 billion on Tuesday.
This is the second time this year that stocks have fallen. In January, Netflix shares fell more than 20% after the streaming company said it expected to add a much smaller number of subscribers than a year ago. According to FactSet, the last time Netflix shares fell 25% in one day was on July 25, 2012, a day after the company warned of slowing growth for its subscription service.
Not counting the premarket dip, the stock was down more than 40% for the year since Tuesday.
Netflix is one of the original FANG stocks, a quartet of large Internet companies reflecting the dominance of tech stocks over US markets. Others are Facebook-owned Meta Platform Inc., Amazon.com Inc. and Google-owned Alphabet Inc. Some analysts also include Apple Inc.
Stock futures tied to the tech-heavy Nasdaq-100 were down about 0.2% early Wednesday.
Users kept people at home in Netflix in the early months of the coronavirus pandemic as lockdowns and measures to contain the virus loomed large, sending the company’s stock price to a record high. The easing of restrictions over the past year and increased competition from other streaming services has hindered Netflix’s growth.
“No one was expecting Netflix to announce that they had lost subscribers. They were expecting a slowdown in subscriptions, but it is a big deal to see Netflix losing customers,” said Swissquote Bank, an online broker. Ipek Ozkardeevskaya, senior analyst at
Netflix said it’s offering a lower-priced ad-supported version of the platform to boost its subscriber base, a change for a company that has since its inception as a commercial-free haven for its members. Has since sold itself. The company had increased its subscription fee earlier this year.
An increasing number of streaming options have made consumers more price-sensitive. Netflix is among the few major streaming services that have yet to offer entertainment offering a cheaper, ad-supported option. The Walt Disney Company’s Hulu has long done so, while Warner Bros. Discovery Inc.’s HBO Max and Disney+ have also pushed into ad-supported streaming.
The move raises investor concerns that rising prices will reduce consumer spending on non-essential goods and services.
“People are asking ‘Is it worth it?'” Ms Ozkardeyskaya said. “As prices go up, the price range is being pulled higher and this is pushing people to exit.