Netflix share price suffers worst day in 18 years

Reed Hastings

Netflix suffered further indignity on Wednesday when its share price suffered ​​its worst day in almost two decades.

The global streaming leader earlier this week reported its Q1 earnings, announcing that it had lost 200,000 subscribers during the period. This was the first time that Netflix subscriber numbers had dropped in over a decade, with the last occurrence coming in October 2011.

The streamer’s share price immediately dipped by 23%, but this was made even worse on Wednesday when the share price continued to tumble. By the end of trading, Netflix’s share price was at just over US$220, down 37% from its price at the start of the day on Tuesday. This represented the company’s worst day in almost 18 years. 

In total, US$54.4 billion was wiped off Netflix’s market cap overnight.

In response, JP Morgan halved its target price of Netflix’s shares to US$305, compared to its median Wall Street of US$400. 

Should this negative trend continue, the financial rewards Netflix reaped from the peak of the Covid-19 pandemic could be wiped out in days. 

In an effort to allay investor concerns, Netflix co-CEO Reed Hastings said on Tuesday that it would look to add an advertising-supported tier to the streamer – which has a US asking price of US$15.49 per month for its standard tier. It also said that it will look at ways to combat and monetise account sharing, which it said accounts for an additional 100 million households on top of its 220 million-plus paying subscribers.

There have also been suggestions that Netflix will rein in its ballooning content costs, with the streamer spending more than $17 Billion on movie and series production in 2021. The streamer however will need to find a balancing point, with previous ‘comfort viewing’ favourites like The Office and Friends having been placed on their respective rights owners’ proprietary streaming services.