Netflix Inc. fell 39% on Wednesday, extending a selloff that set the company on track for $60 billion market value wipeout.
This was after reporting sharp drop in user base.
Netflix fell as low as $212.51 in New York, increasing its year-to-date drop to 64%, making it the worst performing company in the broad S&P 500 and the tech-heavy Nasdaq 100 indexes.
Netflix is worth 0.7 percent of the Nasdaq 100 and 0.3 percent of the S&P 500.
The stock is on track for its largest loss since October 2004, with a market capitalization of less than $100 billion.
The streaming service stunned Wall Street by losing 200,000 users in the first quarter, the first time it has done so since 2011.
It also predicted that it will lose another 2 million users in the second quarter.
“A major issue with Netflix is that it’s far too simple to abandon the service,” said Russ Mould, investment director at AJ Bell.
“Consumers who are feeling the pain of inflation will scrutinize their spending, and streaming services are an easy way to save money”.
The reduction in consumers has prompted Netflix to breach some of its long-standing rules:
It will launch a cheaper, ad-supported alternative for members in the coming years.
It will begin to crack down on those who share their credentials even before then.
This year, Netflix’s stock has suffered as the pandemic-era boom in user sign-ups receded and investors have shifted away from high-value technology and growth businesses owing to increasing bond yields.
Fellow stay-at-home equities, such as Etsy Inc., Zoom Video Communications Inc., and DocuSign Inc., have also suffered steep losses, falling by 38 percent to 51 percent in 2022, as these companies fail to capitalize on the gains earned during lockdowns.
In recent years, Netflix’s stock has been a Wall Street darling, with three out of every four analysts covering the stock recommending a buy at the beginning of the year.
Even Wall Street bulls are changing their tune after Netflix failed even the most pessimistic expectations not once, but twice in a row.
Wall Street analysts cut their price expectations for the streaming-video firm, and at least nine brokerages downgraded the stock.