Why Investors Tuned Out Netflix
Netflix shares have enjoyed an incredible run over the past decade. Subscriber growth seemed limitless, profitability was improving, and the pandemic gave us a compelling case for watching TV at home.
Things took a drastic turn on April 19, 2022, when Netflix announced its Q1 results. Rather than gaining subscribers as forecasted, the company lost 200,000. This was the first decline in over a decade, and investors rushed to pull their money out.
So, is there a buying opportunity now that Netflix shares are trading at multi-year lows? To help you decide, we’ve provided further context around this historic crash.
Netflix Shares Fall Flat
Over the span of a few months, Netflix shares have erased roughly four years worth of gains. Not all of these losses are due to the drop in subscribers, however.
Prior to the Q1 earnings announcement, Netflix had lost most of its pandemic-related gains. This was primarily due to rising interest rates and people spending less time at home. Still, analysts expected Netflix to add 2.7 million subscribers.
After announcing it had lost 200,000 subscribers instead, the stock quickly fell below $200 (the first time since late 2017). YTD performance (as of April 29, 2022) is an abysmal -67%.
What’s to Blame?
Netflix pointed to three culprits for its loss in subscribers:
- The suspension of its services in Russia
- Increasing competition
- Account sharing
Let’s focus on the latter two, starting with competition. The following table compares the number of (Read more...)