Netflix shares are sinking sharply after the streaming service suffered its first subscriber loss in more than a decade.
The company’s customer base fell by 200,000 subscribers during the January-March period, the company disclosed Tuesday in releasing its latest earnings report. Netflix’s stock price plunged more than 37% to $219.50 in early trading on Wednesday as investors fretted about the company’s slowing growth and mounting competition.
UBS analysts downgraded their rating on Netflix’s stock from “buy” to “neutral,” citing fierce competition in streaming, economic headwinds and market saturation.
The decline in subscribers is the first since Netflix became available throughout most of the world outside of China six years ago. The drop this year stemmed in part from Netflix’s decision to withdraw from Russia to protest the war against Ukraine, resulting in a loss of 700,000 subscribers.
Even so, Netflix acknowledged its problems are deep-rooted by projecting a loss of another 2 million subscribers during the April-June period.
The company reported revenue of nearly $7.9 billion in the period, falling slightly short of Wall Street forecasts. For the current quarter ending in July, Netflix said it expects revenue of just over $8 billion. Analysts surveyed by Zacks had expected revenue of $8.2 billion.
A series of declines
If the stock drop extends into Wednesday’s regular trading session, Netflix shares will have lost more than half of their value so far this year — wiping out about $150 billion in shareholder wealth in less than four months.
Netflix also lost 800,000 subscribers in 2011 after it unveiled plans to begin charging separately for its then-nascent streaming service, which had been bundled for free with its traditional DVD-by-mail service. The customer backlash to that move elicited an apology from Netflix CEO Reed Hastings for botching the execution of the spin-off.
The service also saw a decline in U.S. subscribers in 2019.
But the latest subscriber loss was far worse than a forecast by Netflix management for a conservative gain of 2.5 million subscribers. The news deepens troubles that have been mounting for the…