Netflix stock lost more than one-fifth of its value on Friday after the internet television network missed its own target for new subscribers in the fourth quarter and guided much lower than views for the current quarter.
On the stock market today, Netflix stock tumbled 21.8% to close at 397.50, a fall of more than 110 points. Netflix stock has been in a steep decline since late November amid concerns about slowing growth. It hit an all-time high of 700.99 on Nov. 17.
Los Gatos, Calif.-based Netflix late Thursday said it added 8.28 million new subscribers in the December quarter, just missing its goal of 8.5 million. For the current quarter, Netflix forecast adding 2.5 million new subscribers. However, analysts had predicted 5.8 million net adds in the first quarter.
Netflix ended 2021 with 221.8 million subscribers worldwide, with 34% of those in the U.S. and Canada.
Wall Street Sours On Netflix Stock
At least nine Wall Street analysts downgraded Netflix stock following its fourth-quarter earnings report. Of those, eight went from buy ratings to neutral on the stock. One brokerage, Macquarie, cut its rating from neutral to underperform.
Meanwhile, many analysts slashed their price targets on NFLX stock, some by $200 or more.
Pivotal Research Group analyst Jeffrey Wlodarczak said Netflix stock looks like "dead money" for at least two quarters. The company will need to show that there's still growth left in the streaming video market to get its shares climbing again, he said in a note to clients.
Pivotal rates Netflix stock as buy, but Wlodarczak lowered his price target to 550 from 750.
'Red Flags' In Netflix's Fourth-Quarter Report
Netflix's fourth-quarter report raised several "red flags," said Michael Nathanson, an analyst with MoffettNathanson. They included tepid growth despite a flood of new movies and TV series on the service. The company's lowered profit-margin guidance for 2022 also is concerning, he said.
Nathanson reiterated his neutral rating on Netflix stock and cut his price target to 375 from 460.
On a positive note, Netflix delivered better-than-expected profit on in-line sales for the December quarter.
Netflix earned $1.33 a share on sales of $7.71 billion in the fourth quarter. On a year-over-year basis, earnings rose 12% while sales climbed 16%. Analysts had predicted earnings of 83 cents a share on sales of $7.71 billion.
For the first quarter, Netflix expects to earn $2.86 a share on sales of $7.9 billion. That would translate to a 24% decline in earnings year over year on a 10% increase in revenue.
Netflix stock is the IBD Stock Of The Day as a lesson in the importance of sell rules.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
