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J.P.Morgan halved the price target to $305 - far below Wall Street’s median target of $400
Netflix Inc (NASDAQ: NFLX) plunged nearly 40% on Wed nesday morning after the company reported its first drop in subscribers in a decade in their first-quarter earnings. This resulted in a wave of downgrades from Wall Street analysts on fears over long-term growth potential.
The streaming giant’s share dropped to $212.51 in the early New York trading session and is headed for the worst day in nearly 18 years if the losses hold.
Netflix said it had lost around 200,000 since December blaming several headwinds that affected the growth, including increasing competition and the lifting of pandemic restrictions.
The company benefited from COVID-19 lockdowns, with more people seeking out home entertainment.
However, people are spending less time on digital platforms as vaccines rolled out and restrictions eased in recent months.
Weaker short-term growth outlook
Netflix estimated that 100 million households are sharing their subscription passwords with other family or friends and said it’s considering a lower-priced ad-supported tier and a crackdown on password sharing to boost growth.
While analysts generally seemed optimistic about these changes, they noted that it is a long-term solution to the subscriber base problem and won’t help in the short term.
At least nine firms have downgraded Netflix on the disappointing report, including Bank of America and Wells Fargo.
Brokerage J.P.Morgan made the most aggressive move by halving the price target to $305 - far below Wall Street’s median target of $400.
The stock has been a red-hot market performer in the past few years, but during its fourth-quarter 2021 earnings report, Netflix forecasted to add 2.5 million subscribers in the first quarter of 2022, much less than the Wall Street consensus of 5.9 million.
The announcement resulted in a drop in share price by nearly 30% in January.
Netflix on Tuesday forecasted that it expects to lose around 2 million paid subscribers worldwide for the second quarter as well.
Picture Credit: Finshots
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