Netflix stocks have plunged by more than 30 per cent as the markets opened this morning as it remains on track for its biggest drop in nearly a decade.
The struggling streaming giant saw shares plummet by over a third – 37 per cent – to $219 by 10am before slightly recovering.
Even before trading started the website was on the back foot, with shares down 27 per cent overnight despite the firm expecting a strong start to the year.
If the figure stays the same it will wipe at least $50billion from Netflix’s market capitalization of $157billion.
The stock also plunged by more than 20 per cent in January but fell by as much as 25 per cent on July 25, 2012.
At least a dozen analysts rushed to temper their views on the crisis – citing it had been a red-hot market performer over the past few years.
But Elon Musk was among those to slam Netflix yesterday, saying it had become ‘unwatchable’ after being infected by the ‘woke mind virus’.
Meanwhile furious viewers also blasted the company for being ‘too expensive’, ‘nothing to watch’ and not wanting to hear Harry and Meghan’s ‘lectures’.
This graphic shows how Netflix benefitted from the Covid boom. Between January and March 2020, business continued as it had done in 2019 and 2018, before the number of new accounts rocketed from mid-March through to May as much of the world went into lockdown. It continued expanding through 2020, but then declined in 2021. A forecast of growth in the number of subscribers in the first quarter of 2022 shows how Netflix’s expansion has slowed dramatically
Last night the streaming giant said it had shed 200,000 subscribers in its first quarter, falling well short of its modest predictions it would add 2.5million.
Its decision in early March to suspend service in Russia after it invaded Ukraine resulted in the loss of 700,000 of its members.
The company’s stock plunged by 27 per cent in after-market trading on Tuesday afternoon.
But it pummeled other streaming-related stocks, with Roku falling over 6 per cent, Walt Disney by almost 4 per cent and Warner Bros Discovery down 2 per cent.
Netflix, which currently has 221.6 million subscribers, last reported a loss in customers in October 2011.
The firm offered a gloomy prediction for the spring quarter, forecasting it would lose 2 million subscribers.
This is despite the return of series such as ‘Stranger Things’ and ‘Ozark’ and the debut of the film ‘The Grey Man,’ starring Chris Evans and Ryan Gosling.
Wall Street targeted 227million for the second quarter, according to Refinitiv data.
First-quarter revenue grew 10 per cent to $7.87billion, slightly below Wall Street’s forecasts of $7.93billion. It reported per-share net earnings of $3.53.
Netflix said yesterday: ‘The large number of households sharing accounts — combined with competition, is creating revenue growth headwinds.
‘The big COVID boost to streaming obscured the picture until recently.’ The world’s dominant streaming service was expected to report slowing growth.
Analysts also rushed to temper their views on the plummeting stock prices, pointing out it has been solid over the last few years.
Kim Forrest, chief investment officer at Bokeh Capital Partners in Pittsburgh, said: ‘Netflix is a poster child for what happens to growth companies when they lose their growth.
‘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 JP Morgan made the most aggressive move by halving its price target to $305 – well below the stock’s median Wall Street target of $400.
JP Morgan analyst Doug Anmuth said: ‘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.’
Anmuth also slashed his estimate for 2022 net subscriber additions by half to 8 million.
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.
In an effort to calm nerves, company executives told analysts they were looking to offer an advert-based tier over the next year or two.
They also promised a crackdown on password sharing – a long-running problem for the service.
‘We’ve got the full kitchen sink … That might not be enough,’ said Russ Mould, investment director at AJ Bell.
Netflix is losing billions of dollars a year because of illegal password-sharing ‘marketplaces’ that offer access for just $1, experts have claimed. The popular streaming app is missing out on up to $6.25billion annually as customers use the services to dodge the $19.99 a month premium account fee. But the firm last month launched its first major counteroffensive to password sharing by letting watchers add up to two other users for just $2 in some countries. Netflix is not the only website to be hit by the scams, with HBO Max and Disney+ subscriptions also being ripped off by dodgy so-called marketplaces
General views of the Netflix Hollywood campus on Vine on April 19, 2022
It comes amid intense competition from established rivals like Amazon.com and traditional media firms such as Walt Disney, Warner Bros Discovery and Apple.
Responding to a tweet about the subscription service’s devastating performance, Musk said: ‘The woke mind virus is making Netflix unwatchable.’
A follower then responded: ‘Woke mind virus is the biggest threat to the civilization.’ The world’s richest man replied to him: ‘Yes.’
Netflix has released a variety of recent hits including Squid Game, Bridgerton and Sex Education.
But it has also produced ‘woke’ content such as He’s Expecting, which depicts a man who becomes pregnant.
Viewers also blasted the company this week, saying they had no interest in Harry and Meghan’s ‘patronising, virtue-signalling lectures’, that there was ‘nothing to watch’ and it was ‘too expensive’.
One customer said: ‘Making Harry and Meghan program directors definitely didn’t help Netflix.’
Another wrote: ‘Netflix has been Markled. The curse of having Meghan Markle and Harry.’
A third said: ‘The majority of the public are not remotely interested in watching content like Harry & Meg’s patronising, virtue-signalling lectures on Netflix either, no wonder their prices have gone up!’
They added: ‘If Netflix don’t serve up better content, the subscription isn’t value for money.’
Another posted: ‘Nothing on Netflix seemed interesting enough to watch. We cancelled it recently to save money’.
And one more added: ‘I’m one of those who recently cancelled Netflix, largely because it’s a massive time suck and there’s nothing really good to watch. Maybe produce decent content and people will hang around?’
Elon Musk has slammed ‘unwatchable’ Netflix, managed by CEO Reed Hastings (right) for becoming infected by the ‘woke mind virus’ as the streaming giant hemorrhages subscribers
New Netflix show He’s Expecting depicts a man who becomes pregnant, with some viewers turning off at its ‘woke’ programming
Harry and Meghan attend the Invictus Games opening ceremony at Zuiderpark on April 16, 2022 in The Hague, Netherlands
Streaming services spent $50billion on new content last year, in a bid to attract or retain subscribers, according to researcher Ampere Analysis.
That is a 50 per cent increase from 2019, when many of the newer streaming services launched, signaling the quick escalation of the so-called ‘streaming wars’.
As growth slows in mature markets like the US, Netflix is increasingly focused on other parts of the world and investing in local language content.
It said: ‘While hundreds of millions of homes pay for Netflix, well over half of the world’s broadband homes don’t yet — representing huge future growth potential.’
Netflix has been able to increase subscription prices in the US, the UK and Ireland to fund content production and growth in other parts of the world, such as Asia.
But subscriptions in these growth markets are lower.
Benchmark analyst Matthew Harrigan warned the uncertain global economy ‘is apt to emerge as an albatross’ for member growth and Netflix’s ability to raise prices.
Streaming services are not the only form of entertainment vying for consumers’ time.
The latest Digital Media Trends survey from Deloitte, released in late March, revealed Generation Z, those aged 14 to 25, spend more time playing games than watching.
The majority of Gen Z and Millennial consumers polled said they spend more time watching user-created videos like TikTok and YouTube than streaming services.
Netflix, recognizing the shift in consumer entertainment habits, has begun to invest in gaming, but it does not yet contribute materially to the company’s revenue.