Despite a grim business outlook, Netflix shares declined another 4 percent on Thursday after falling 35 percent on Wednesday. Since the beginning of 2022, the streaming giant's value has decreased by about two-thirds.
As of today, Netflix's market value is about $97 billion, which places it at 146th place in the world with a total market cap below $100 billion.
According to the latest announcement from Netflix, its market value was wiped out by $55 billion following the loss of 200,000 subscribers in the first quarter. During the next quarter, the company anticipates losing another 2 million subscribers.
Stocks have suffered steep declines in recent months, causing investors to wonder whether to hold on to them or sell them. A longer-term investment in the stock is recommended by experts.
The stock of Netflix has sharply declined for the following reasons:
Expectations that are not met
The difference between expectations and reality is exemplified by Netflix, according to Vikas Gupta, CEO of Omniscience Capital. It is psychologically exuberant to report negative numbers whenever a company does so.
The company would have to add millions of customers every quarter, which is impossible. Slow growth is inevitable at some point."
A significant portion of daily life was devoted to streaming services and OTT platforms during the lockdown, as they were the main source of entertainment during this time. Streaming services are clearly suffering as customers are cutting back on discretionary spending due to the high costs of essentials.
Kristal.AI's Founder and CEO, Asheesh Chanda, believes that high growth tech companies cannot escape inflation. A company's costs of capital and revenue are hit in a double whammy.
A loss of 7,00,000 customers has been suffered by the company following Russia's invasion of Ukraine. Approximately half a million new subscribers have been added, but Gupta says that numbers fall substantially short of expectations.
A number of countries such as the US, India, and others are experiencing severe problems with demand due to account sharing. Revenue prospects for the company are affected as a result.
In the near future, a large underpenetrated market will boost the demand for the product, so the company will have to rethink its monetization model," said Gupta from Omniscience Capital.
Competitors are fierce
Apple, Amazon, Disney, and other global giants and regional players are stiff competitors for the company. There is plenty of content available to subscribers.
Rather than panicking, Gupta suggested that Indian investors should focus on revenue growth. It's likely that the company will make a turnaround after a year or two, so existing customers should keep it in their portfolios for a year or two.
What are the opinions of experts?
Recent purchases have increased nearly twice as much as they were a week or month ago, according to Vested Finance, a global investment platform.
Based on WSJ Markets (Wall Street Journal), Netflix even has a consensus rating of 'hold.' Earlier this month, it had been 'overweight'. It is still a gloomy scenario at the moment. The target price for Netflix has been slashed by more than 50 percent from $605 to $300 at global brokerage firm BofA Securities.