Web Desk (National Times)- Netflix shares lost more than a quarter of their value in premarket trading 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.<\/p>\n
The streaming pioneer’s shares fell 27.2% to $253.71 and were headed for their worst day in a decade if the losses hold. At least a dozen analysts rushed to temper their views on a stock that has been a red-hot market performer in the past few years.<\/p>\n
“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.<\/p>\n
“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.”<\/p>\n
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.<\/p>\n
“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.<\/p>\n
Anmuth also slashed his estimate for 2022 net subscriber additions by half to 8 million.<\/p>\n
The share slump could erase the stock’s gain over the past two years when its business thrived as new customers joined its platform to ride out the lockdowns.<\/p>\n
In an effort to calm nerves, company executives told analysts on Tuesday they were looking to offer an advertisement-based tier over the next year or two and promised a crackdown on password sharing – a long-running problem for the service.<\/p>\n
“We’ve got the full kitchen sink … That might not be enough,” said Russ Mould, investment director at AJ Bell.<\/p>\n
Netflix’s rivals already have ad-driven versions or are considering one – HBO Max offers an ad-supported subscription, while Disney+ recently said it would launch an ad-based tier.<\/p>\n
“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.<\/p>\n
Demand for fresh and engaging content is also increasing, forcing Netflix and others to think about bigger budgets for production even as costs increase in an inflationary environment.<\/p>\n
“Netflix’s profitability or business model is not the problem as the figures show, but that some consumers might be cancelling their subscription due to inflation and post-pandemic user fatigue,” said Peter Garnry, head of the equity strategy at Saxo Bank.<\/p>\n
For the second quarter, Netflix has lined up new seasons of popular shows ‘Ozark’, ‘Stranger Things’ and ‘Grace and Frankie’.<\/p>\n
Needham, however, took a divergent view. The brokerage upgraded its rating on the stock to “hold” from “underperform”, encouraged by the company’s plans to add a low-priced advertising tier.<\/p>\n","protected":false},"excerpt":{"rendered":"
Web Desk (National Times)- Netflix shares lost more than a quarter of their value in premarket trading 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 27.2% to $253.71 […]<\/p>\n","protected":false},"author":1,"featured_media":30455,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-30451","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-international","entry"],"yoast_head":"\n