Netflix (NFLX 2.60%) sank on Friday, adding to the brutal decline in its stock price since it delivered its first-quarter earnings report on April 19. As of 2:10 p.m. ET, the streaming leader's shares were down by more than 4%, and had been off by as much as 6.6% earlier in the session.
Netflix shocked investors a few weeks ago when it disclosed that its total subscriber number fell by 200,000 in the first quarter. It was the first time the streaming titan had a net loss of subscribers in more than a decade. Worse still, Netflix said it expects to lose another net 2 million subscribers in the second quarter.
Netflix has shed nearly half its value since then. The decline is even more shocking when viewed relative to the stock's peak above $700 per share in November. It is now down a staggering 74% from that lofty level.
Multiple factors contributed to the subscriber shortfall. Inflation is driving consumers to cut back on expenses. According to the company, password sharing is allowing more than 100 million households to use the service without paying for subscriptions of their own. The company's decision to shut down its service in Russia after that country invaded Ukraine meant losing 700,000 accounts in Q1 -- notably more than its net subscriber loss for the period. And price increases enacted by streaming service providers to cover their soaring content budgets are leading customers to question the value of their subscriptions.
Perhaps the biggest issue for Netflix is intensifying competition. Formidable rivals such as Disney, Amazon, Apple, Warner Bros Discovery, and Paramount Global are bolstering their content libraries and battling fiercely for market share. This streaming arms race is leading analysts to question whether Netflix can continue to spend its way to dominance -- or if it's at risk of being surpassed by some of its deep-pocketed competitors.
In a more bullish market environment, investors might have been more sanguine about Netflix's prospects. But inflation fears and the prospect of rapidly rising interest rates are driving many people to take a more pessimistic view of even the best growth stocks. And that's no doubt contributing to Netflix's recent swoon.