Netflix shares plunge almost 40% following 'sea change' subscriber miss
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Netflix (NASDAQ:NFLX) shares dropped by 37% on Wednesday after the streaming TV giant reported weaker-than-expected results and issued guidance that was well below forecasts, prompting several Wall Street analysts to downgrade the stock and some even wondered whether the streaming party is over.
At issue was Netflix (NFLX) reporting a net loss of 200,000 subscribers in the first quarter of this year---its first such loss in a decade. Netflix (NFLX) its subscriber losses were juiced by the company suspending its service in Russia due to the war against Ukraine, and losing all of its 700,000 paid memberships in the country. Netflix (NFLX) had earlier said it expected to add 2.5 million subscribers worldwide.
Piper Sandler analyst Thomas Champion downgraded Netflix (NFLX) to neutral from overweight and slashed his price target to $293 a share, down from $562. Chapman said that the company's tone on its earnings conference call was "subdued" as a number of comments point to several issues going forward, including customers sharing passwords.
"Subscribers have slowed and we struggle to see a return to a pre-COVID net add cadence," Champion wrote, adding that generating revenue from password sharing and new advertising supported tiers "look promising, but implementation is likely two [or more] years away."
For its first quarter, Netflix (NFLX) earned $3.53 a share on $7.87 billion in revenue. A consensus of Wall Street analysts expected Netflix to earn $2.92 per share on sales of $7.95 billion.
J.P. Morgan analyst Doug Anmuth, who hosted the conference call with Netflix's (NFLX) management team, including co-founder Reed Hastings, spared no sentiment about Netflix (NFLX) as he downgraded the stock to neutral and lowered his price target to $300 a share from $605.
Anmuth called the results a "sea change quarter" and said Netflix (NFLX) "essentially conceded to every key point of the bear thesis."
"The bigger factor is managementâs acknowledgment of relatively high household penetration when including account sharing, increased competition, and COVID pull-forward giving way to fundamental weakness," Anmuth wrote in a note to clients.
Anmuth added that all of these factors, as well as additional foreign exchange headwinds, are likely to pressure Netflix's (NFLX) 2022 revenue growth to be roughly 10%. 
"We're moving to the sidelines as we look for greater confidence in restoring subscriber growth & reaccelerating revenue, while also increasing development velocity in account sharing and advertising," Anmuth added.
The subscriber situation doesn't appear to be getting any better in the months ahead.
Netflix (NFLX) said that for its second quarter it expects to lose 2 million subscribers, and earn $3 share on $8.05 billion in sales. Those targets also fall below current estimates. 
Along with Anmuth, Pivotal Research analyst Jeffrey Wlodarczak cut his rating on Netflix (NFLX) to sell from buy, and slashed his price target by nearly 60% to $235 share from $500 on what he described as a "shocking" subscriber miss and weak guidance. 
Citi analyst Jason Bazinet, who kept his buy rating and $450 price target intact, pointed out that it was "hard to find any silver linings" in the report.
Other streaming-related stocks also fell, including Walt Disney (DIS), which shed 5% of its value, and Roku (ROKU), which dropped by 8.5%, and FuboTV (FUBO), which gave up almost 9%.
Last week, Morgan Stanley trimmed its estimates and price target on Netflix (NFLX) due to a series of factors such as some near-term risk to subscriber expectations.