Shares of Netflix Inc. widely plunged on Tuesday post-trading after reporting its first decline in paid users in more than a decade.
The leading streaming company tanked 25.73% or 89.71 points to $258.90 per share.
This movement completely reversed its previous gain of 3.18% or 10.75 points to $348.61 per share. In addition, it dragged $89.83 billion to the firm’s stock market valuation.
In January, the business warned of weak subscriber growth, pushing the company to drop nearly half its value. It has traded 41.64% or 248.76 lower since the start of the year.
Accordingly, Netflix reported a loss of 200,000 subscribers in its first quarter. It significantly fell short of its forecast of adding 2.50 million subscribers.
Moreover, it lost 700,000 members after suspending service in Russia amid the Ukraine invasion.
The sluggish subscriber growth prompted the company to contemplate offering a lower-priced version of the service with advertising. It cited the success of similar offerings from rivals HBO Max and Disney+.
Furthermore, Netflix offered a gloomy prediction for the current quarter. It projected that it would lose 2.00 million subscribers in Spring. This went below the Wall Street consensus of a 2.70 million increase.
This downbeat forecast came in despite the return of the most anticipated series Stranger Things and Ozark.
Then, its first-quarter revenue rose 10.00% year-over-year to $7.87 billion. However, it missed the analysts’ expectation of $7.93 billion.
Meanwhile, it reported per-share net earnings of $3.53, surpassing the market estimate of $2.89.
Netflix’s downdraft caught other video streaming-related stocks. For instance, Roku skidded 6.15% or 7.18 points to $109.60 per share. Similarly, Walt Disney Co. slashed 4.28% or 5.65 points to $126.25 per share.
Netflix warns of crackdown on password sharing
In line with the dampened results, Netflix warned of a global crackdown on password sharing. It estimated more than 30.00 million American and Canadian households that use a shared password to access its content.
The video streaming company said more than 100.00 million additional households were likely using a shared account worldwide.
Netflix acknowledged that it has purposefully allowed generous out-of-home password sharing because it helped get people hooked on the service.
However, the rising competition in the sector ate into the platform’s growth. Correspondingly, the streamer said that it wants the millions of households sharing passwords to start paying.
It currently operates through 222.00 million subscribers worldwide. It largely benefitted from the booming growth of the tech sector during the pandemic. Nevertheless, that customer surge has subsided and now turned negative.
