Netflix’s shocking announcement that it has lost subscribers for the first time in a decade has resulted in a dramatic drop in stock price and sent ripples across the streaming industry. The company’s troubles became known during its Q1 earnings after-hours on Tuesday.
What happened? Investors and analysts had low expectations for this quarter, but Netflix underperformed even those already-weak projections. As a result, the company’s shares hit their lowest point since early 2018, falling as much as 37% by Wednesday morning. The drop resulted in a loss of over $50 billion in market cap, plunging the company’s valuation to under $100 billion. This week’s drop is just the latest in a series of financial blows suffered by Netflix, and combined with a January drop of 20%, has seen the company’s shares lose two-thirds of their value over the past six months. Investors who once treated Netflix as a high-tech growth stock have clearly readjusted to viewing the company as a traditional media content provider.
How big was the drop? The biggest shock for investors was that the company reported a loss of 200,000 subscribers worldwide in the first quarter of 2022. It’s the first time since the company split its dvd and streaming businesses in 2011 that Netflix has seen a fall in subscriber numbers. Price hikes in the U.S. and Canada resulted in a loss of 600,000 subscribers in these two countries alone, though Japan, India, and the Philippines added subscribers. Some perspective: the company had forecast 2.5 million additional subscribers in Q1, which was already considered a disappointment since they had added 4 million in the same period of 2021. To make matters worse, Netflix offered even weaker guidance for Q2, warning that it may lose another two million subscribers over the next three months.
