On Tuesday evening, the streamer reported earnings that showed it lost subscribers for the first time in more than a decade. The results and weak outlook led to a wave of downgrades from Wall Street over fears of the company's long-term growth potential.
Competition and the easing of pandemic restrictions are impacting growth. The company was boosted by coronaviruses stay-at- home orders. People spent less time on digital platforms.
Slower household broadband growth was a factor in the company's weak forecast. 100 million households are sharing their subscription passwords with other family or friends, making it harder to grow memberships.
The company made changes in the future. It is considering a lower-priced ad-supported tier and suggests a crackdown on password sharing is coming. Analysts seemed generally positive about the changes, but they think they will take a year or two to be implemented.
Although their plans to reaccelrate growth have merit, by their own admission they won't have noticeable impact until 24. The firm was one of at least nine companies to lower their ratings on the disappointing report.
After what can only be described as a shocking 1Q subscriber miss and weak subscriber guidance, we reduced our subscriber forecasts and pushed back our profitability forecasts substantially. The firm decided to sell the stock.
Negative sub growth and investments to reaccelrate revenues are the nail in the NFLX narrative coffin, according to a Wednesday note from Wells Fargo analysts.
The stocks of several streaming services took a dive Wednesday morning as investors wait for updates on their growth. After markets opened on Wednesday, Disney's shares were down about 5%. Similarly, shares of Paramount, Warner Bros. Discovery, and Roku were all down.
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Michael Bloom contributed to the report.
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