[Asia Economy New York=Special Correspondent Joselgina] Netflix, the world's largest online video streaming service (OTT) provider, plummeted more than 35% on the New York Stock Exchange on the 20th (local time), wiping out over $54 billion (approximately 66.69 trillion KRW) in market capitalization in a single day. Wall Street investment banks have consecutively downgraded their investment ratings.
On this day, Netflix closed the regular trading session at $226.19, down 35.12% from the previous close on the New York Stock Exchange. This is the largest drop in about 18 years. During the session, Netflix's stock price fell as low as $212.51. Netflix's market capitalization dropped to $100.4 billion, erasing $54 billion in just one day.
This is the aftermath of Netflix, which grew rapidly during the COVID-19 pandemic, recording a subscriber decline for the first time in 11 years. The day before, Netflix announced that its paid subscribers in the first quarter decreased by 200,000 compared to the fourth quarter of last year, totaling 221.6 million.
The immediate downgrades by Wall Street investment banks also influenced the sharp decline in the stock price.
JPMorgan lowered its price target by 50%, stating that Netflix could hit new lows in the coming months. Wells Fargo downgraded its investment rating to 'Equal Weight.' Bank of America (BoA) also downgraded its rating, evaluating that Netflix's additional measures, such as cracking down on shared accounts, would not have a significant impact on the company until 2024.
The economic media CNBC reported, "Netflix's stock price plunged 35%, wiping out more than $50 billion in market capitalization," and "at least nine banks on Wall Street have lowered their price targets."
Netflix's plunge dragged down other streaming companies' stocks on the New York Stock Exchange that day, including Disney (-5.56%), Roku (-6.17%), and Warner Bros. Discovery (-6.04%). It also weakened investor sentiment toward tech stocks, causing the tech-heavy Nasdaq index to close down 1.22% from the previous session.
The outlook surrounding Netflix's earnings is bleak. Analysts say it has reached its limits as a growth stock, with concerns not only about disappointing first-quarter results but also about long-term growth potential. In particular, worries about a recession and inflation are worsening the macroeconomic environment.
The day before, Netflix revealed that 100 million households were watching for free by sharing paid accounts and announced plans to crack down on this to increase subscribers and consider launching a new low-cost ad-supported service. However, this too has been met with evaluations that it is not a solution. Michael Nathanson, a media analyst at MoffettNathanson, told CNN, "What has worked so far may no longer be effective." Peter Ganni, Head of Investment Strategy at Saxo Bank, assessed that cancellations due to rising inflation are a bigger problem.
Netflix's stock price has fallen more than 62% since the beginning of this year. Previously, Netflix cited recession, inflation, and geopolitical risks such as Russia's invasion of Ukraine as the background for the subscriber decline in the first quarter. In particular, it announced that it lost 700,000 subscribers due to its withdrawal from the Russian market.
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