5 Reasons Why Netflix Stock Crashed 40% In 2 Days. Should Indian ...

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Read Today's Paper 5 reasons why Netflix stock crashed 40% in 2 days. Should Indian investors log out?SECTIONS5 reasons why Netflix stock crashed 40% in 2 days. Should Indian investors log out?By Pawan Nahar, ETMarkets.comLast Updated: Apr 22, 2022, 02:35:00 PM ISTRate Story

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Netflix's market cap has dropped below the $100 billion mark and is currently the 146th largest company in the world with a total valuation of about $97 billion.

New Delhi: In just two sessions, Netflix stock lost about 40 per cent of its market value following a dip in its subscriber base. After a massive 35 per cent fall on Wednesday, shares of Netflix dropped another 4 per cent on Thursday amid grim business outlook. The streaming giant has lost about two-third of its value in 2022 so far.Netflix's market cap has dropped below the $100 billion mark and is currently the 146th largest company in the world with a total valuation of about $97 billion.The latest announcement of losing 200,000 subscribers in the first quarter of the year wiped about $55 billion off Netflix’s market value. The company warned that it expected to lose another 2 million subscribers in the next quarter.The recent round of steep correction has put investors into a dilemma over whether they should buy the stock, hold it or make an exit from the counter. Experts say investors should hold the stock for a longer run.Here are five major reasons behind the sharp in Netflix's stock: ET logo

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1) Mismatch of expectationsDr Vikas Gupta, CEO of Omniscience Capital, said Netflix is a classic example of mismatch between expectations and reality. Whenever a company reports negative numbers, there is a psychological exuberance to it. "One expects that company will add millions of customers every quarter, which is not possible," he added. "At some point growth will slow down."2) Exit from RussiaFollowing Ukraine's invasion by Russia, the company has halted its operations in the latter one, with a loss of 7,00,000 customers. The company has added about half a million subscribers, though the numbers fall significantly short of expectations, Gupta said.3) Inflation worriesDuring lockdown, streaming services and OTT platforms became an integral part of daily lives as they were the biggest source of entertainment when other recreational activities were shut. High cost of essential items is forcing customers to cut back on discretionary spends, which is clearly hurting the business for streaming services.You Might Also Like:

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"High growth tech companies, whose consumer base surged during the pandemic, are not immune to inflation," Asheesh Chanda, Founder and CEO of Kristal.AI, said. It is a double whammy for companies, being hit both by high cost of capital and drop in revenues.4) Plateauing of demandThe company is facing severe concerns related to demand due to account sharing in countries like the US, India and others. This dents the revenue prospects of the company."The company needs to rework its model for monetisation in the near future as there is a big underpenetrated market, which will boost the demand," said Gupta from Omniscience Capital.5) Stiff competitionThe company is facing stiff competition from global giants including Apple, Amazon, Disney and various other regional players. Subscribers have enough on the platter to consume content.You Might Also Like:

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"Indian investors should not panic as the company is focusing on revenue growth," Gupta suggested. "Existing users should keep it in their portfolio for a year or two, after which the company is likely to make a turnaround."What do experts say?According to Vested Finance, a global investment platform, buying has more than doubled recently, compared to the previous week or month.Even the consensus rating for Netflix is 'hold,' according to data from WSJ Markets (Wall Street Journal). However, it was 'overweight' a month earlier. The current scenario continues to remain gloomy. Global brokerage firm BofA Securities has slashed the target price of Netflix by more than 50 per cent to $300 from $605 earlier.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)Add ET Logo

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