Netflix (NFLX -0.74%) shareholders lost ground to a falling market on Tuesday as shares dropped 5% by 11 a.m. EDT compared to a 2.3% slump in the S&P 500. The decline added to significant short-term losses for the streaming video giant, whose shares are down 70% so far in 2022.
Netflix stock was caught in a wider move away from tech stocks and growth stocks, but the drop was also powered by unwelcome news from Best Buy (BBY -2.21%).
Best Buy said before the market opened that first-quarter sales trends were weaker than management had expected in the Q1 period that ended on May 1. Comparable-store sales fell 8%, in fact, and management sees that sluggish trend continuing through the rest of the year. Best Buy lowered its 2022 sales outlook on that basis while citing relatively strong customer traffic.
Netflix's business would be hurt by slower consumer spending, but it is even more exposed to a drop in sales for home entertainment devices like smart TVs. Best Buy noted weakness in these merchandise categories in Q1 following two strong years of growth during earlier phases of the pandemic.
Netflix already issued a downbeat Q2 outlook in mid-April when it projected losing nearly 2 million subscribers. Co-CEO Reed Hastings listed "the uptake of connected TVs" as one factor influencing that weak result.
Today's news from Best Buy doesn't necessarily mean that Netflix will miss its growth forecast when it reports Q2 results in mid-July. But it does suggest a modestly weaker consumer spending environment today compared to a few months ago.
And shoppers' lack of interest in at-home entertainment devices appears to be continuing following several years of higher engagement in streaming, gaming, and home theater use. That shift will pressure growth results for Netflix and its digital peers.