Netflix (NFLX) stock is collapsing after the firm disclosed its first quarterly loss of subscribers in more than a decade, greatly missing forecasts and causing concern among investors who had been banking on a few of large tech companies to keep growing at a rapid pace.

What’s going on: When the market opened on Wednesday, Netflix’s shares plunged 30%, erasing more than $45 billion from the company’s worth. Netflix reported it lost 200,000 customers in the first three months of the year, despite expectations of 2.5 million new subscribers.
The streaming behemoth, whose stock had already lost more than 40% this year, attributed the decline to greater audience competition and Russia’s invasion of Ukraine.

Netflix claims that its choice to leave Russia lost it 700,000 members. The economy, on the other hand, isn’t helping matters.
Inflation is causing families to rethink their financial plans. In the first three months of 2022, 1.5 million streaming subscriptions were terminated in the United Kingdom. According to a new survey by media consultant Kantar, more than a third did so to save money. “People’s priority right now are food and electricity, not viewing ‘Stranger Things,'” said Michael Hewson, chief market analyst at CMC Markets.
As it seeks to stop the bleeding, Netflix has hinted that it may make significant changes to its company. It’s re-examining how to deal with password sharing. Analysts were also informed by CEO Reed Hastings that the business will investigate a lower-cost subscription option with advertising. Hastings stated Tuesday, “I’ve always been against the complexity of advertising and a huge admirer of the simplicity of subscription.” “However, as much as I support it, I am a larger supporter of consumer choice.”

The big picture According to Hewson, the stock’s drop demonstrates that Netflix was grossly overpriced, as investors flush with cash during the epidemic recovery fueled a massive surge. Netflix’s stock increased by 86 percent from the end of 2019 to the end of 2021, while the S&P 500 index increased by 48 percent.
“They were anticipating people would be tied down for the rest of their lives,” Hewson said, noting that, unlike Apple and Amazon, Netflix doesn’t have many other revenue streams.
Clearly, the atmosphere of the market has shifted. The dramatic reaction might set the groundwork for another tumultuous earnings season, with investors already jittery following the big banks’ poor reports. When Netflix and Facebook published fourth-quarter data earlier this year, their stock prices plummeted as investors demonstrated a rising sensitivity to negative forecasts for the future. The reason for this was that the Federal Reserve was about to begin rising interest rates, which would put pressure on high-growth businesses. Facebook’s dismal results resulted in the largest market value fall for an S&P 500 firm ever.
Rates are now officially on the increase, and the question of whether the Fed will be much more aggressive than predicted is being debated on a daily basis. The conflict in Ukraine is also depressing public opinion. As a result, prominent stocks might see large fluctuations when they release their findings.