Shares of Netflix plunged 36% Wednesday after the streamer reported earnings Tuesday evening that showed it lost subscribers for the first time in more than 10 years. The results and weak outlook led to a wave of downgrades from Wall Street on fears over the company’s long-term growth potential.
The drop caused Netflix to shave more than $56 billion off its market cap. Netflix said several headwinds are affecting growth, including increasing competition and the lifting of pandemic restrictions. The video streamer’s business benefited from coronavirus stay-at-home orders, with more people seeking out digital entertainment. But in recent months people have been spending less time on digital platforms as vaccines rolled out and mandates eased.
Slower household broadband growth also played a role in the company’s weak forecast. Netflix estimated that 100 million households are sharing their subscription passwords with other family or friends.
The company, in a effort to boost growth, said it’s considering a lower-priced ad-supported tier and suggested a crackdown on password sharing is coming. And while analysts seemed generally upbeat about these changes, they noted that it wasn’t a short-term solution to the subscriber base problem.