The Netflix (NASDAQ:NFLX) brand sustained a major blow over the past week. Its shares have plunged 39% week-over-week as of mid-afternoon trading on April 25. The dip occurred after the release of its first quarter 2022 results on April 19.
Netflix reported a loss of 200,000 subscribers in the first quarter of 2022. This was the first drop in paid subscribers the company reported in more than a decade. It comes after a period of huge growth for what has become the largest streaming service on the market. The COVID-19 pandemic provided an even bigger boost to this space. However, there were obvious storm clouds on the horizon as Netflix was set to face off against stiff competition in the form of Amazon, Apple, and Disney streaming platforms.
The company expects to lose another 2 million subscribers in the second quarter. Its co-CEO Reed Hastings said that Netflix will explore lower-priced ad-supported tiers in order to draw in new subscribers. Meanwhile, it also warned that a crackdown on household account sharing may be coming. It claimed that access it being shared by more than 100 million additional households.
Revenues were still up 10% from the prior year to $7.87 billion. Meanwhile, net income dropped 6.4% to $1.6 billion. This earnings report is unquestionably a downer for the streaming giant, but investors should not declare Netflix a dead man walking just yet. However, it will need to exercise a deft touch as it seeks to explore new avenues to promote growth going forward.
Shares of Netflix last had an RSI of 18, which puts the stock well into technically oversold territory. Investors pay be able to poach short-term gains by jumping on this sharp dip. However, more turbulence is likely to come as it continues to bleed subscribers in the first half of 2022. I’m looking to stay on the sidelines right now.
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