Netflix shares are down 24% in trading Friday after the company quietly admitted in its fourth-quarter earnings that streaming competition is eating into its growth. If it remains down more than 20% until close it will be Netflix’s worst day since July 25, 2012, when shares fell 25%. And it will likewise be the worst week since July 27, 2012, when the stock fell about 28%.
Despite beating analyst expectations on the top and bottom line and in user numbers for the quarter, the admission seemed to rock investors. Netflix executives have infamously pointed to things like sleep as potential competitors, claiming anything else users could be doing with their time is competition.
But even as the streaming wars heated up with Disney and even CNBC owner NBCUniversal entering the mix, Netflix leaders mostly maintained resolved about the new competition.
“While this added competition may be affecting our marginal growth some, we continue to grow in every country and region in which these new streaming alternatives have launched,” the company said in its shareholder letter on Thursday.
The question of competition is even more crucial given Netflix increased prices just last week in the U.S. and Canada, raising its standard plan from $13.99 to $15.49 per month. With other alternatives available to consumers, higher prices could become a trickier gamble.
KeyBanc Capital Markets analysts lowered their rating on the stock from overweight to Sector Weight following Thursday’s earnings release. They wrote in a note that among the reasons they are less confident in the outlook is that, despite an improved content slate, the company still experienced challenges to its gross additional subscribers.
Piper Sandler analysts, which maintained an overweight rating on the stock while cutting its target price from $705 to $562, wrote in a note Friday that it still “remains early days” for subscriber growth opportunity overall.
“The other regions we think look nascent and likely to return worldwide net adds to the 20MM+ annual growth range. It remains early in the transition away from linear TV and opportunities like gaming and merchandising have yet to take hold,” Piper Sandler wrote.