The reasons cited were familiar: inflation squeezing household budgets, the war in Ukraine (which led to the suspension of service in Russia), and intense competition from Disney+, HBO Max, Amazon, and Apple.
Investors and analysts have spent the last five years treating Netflix like a high-growth tech stock. It is now a mature media company. Mature media companies don't trade at 50x earnings; they trade at 15x earnings. netflix free fall
Is Netflix in a terminal free fall, or is the market simply confusing turbulence with a crash? The panic began in earnest in April 2022, when Netflix reported a loss of 200,000 subscribers in the first quarter—its first loss in over a decade. The company then projected a loss of another 2 million in Q2. The stock was cut in half almost overnight. Mature media companies don't trade at 50x earnings;
While Disney and Warner Bros. Discovery are slashing content to save cash, Netflix is still spending roughly $17 billion annually on content. They have the data, the global reach, and the algorithm. Furthermore, the "free fall" narrative may be overblown. The company then projected a loss of another 2 million in Q2
First, the company finally admitted that password-sharing (estimated to affect over 100 million non-paying households) is a problem. After years of famously tweeting that "Love is sharing a password," Netflix is now charging extra for "sub accounts" in Latin America and Europe, with a global rollout imminent.
These moves are financially necessary, but they represent an identity crisis. Netflix is no longer the cool, disruptive tech platform; it is a utility provider trying to monetize every single screen in the house. Here is the bull case for Netflix: They have a moat.
Second, Netflix is doing what it once mocked cable for doing: After insisting for years that it would never run commercials, the company launched a "Basic with Ads" tier in late 2022.