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Netflix’s stock price has plummeted sharply in recent weeks due to ongoing concerns about its growth. NFLX is currently trading at $340, significantly lower than its all-time high of $702, marking a 51% decline. This drop has reduced the company’s market cap to approximately $151 billion, making it the worst-performing FAANG stock so far this year.
Several factors have contributed to Netflix’s stock price decline. First, there has been a shift from “lockdown stocks” to those expected to benefit from economic reopening. Companies that thrived during the lockdown, like Zoom Video, Teladoc, and Roku, have all seen their stock prices crash. This trend is evident in the performance of the Ark Innovation Fund, which has lost over 70% of its value in recent months.
Second, Netflix is facing increased competition in the movie streaming industry. Platforms like Disney+ have attracted many users, now boasting over 126 million subscribers. Much of this growth comes from the U.S., driven by Disney’s popular franchises like Pixar and Marvel. This shift was evident in the fourth quarter when Netflix lost subscribers in the U.S.
Third, Netflix’s decision to exit the Russian market due to the Ukraine invasion has also impacted its stock. The company is estimated to have had over 1 million subscribers in Russia. Assuming an average subscription price of $10, this exit could result in a loss of about $10 million per month, or $120 million annually.
While this loss is relatively small compared to Netflix’s $30 billion revenue in 2021, the stock has still garnered some positive attention on Wall Street. Bill Ackman of Pershing Square Capital recently announced a significant purchase of Netflix shares. Additionally, analysts at Edward Jones and Citigroup have upgraded the stock, although others, including Wolfe Research, Jefferies, Bank of America, and JP Morgan, remain less optimistic.
The daily chart shows that Netflix’s share price has been in a steep downward trend over the past few months. The stock broke below a key support level at $477, the lowest level in 2021, and has since fallen below both short-term and long-term moving averages, forming a break-and-retest pattern.
Given these factors, there is a strong possibility that Bill Ackman could be wrong, and the stock may continue to decline in the coming months. If this downward trend persists, the next key support level to watch is $300. However, a move above $400 would invalidate this bearish outlook.