Netflix has warned that subscriber growth would slow substantially in early 2022, sending its stock tumbling 20 per cent in pre-market trading on Friday in the latest instance of investors dumping shares in companies that have thrived during the pandemic.
The streaming company projected after the close of trade on Thursday that it would add just 2.5m subscribers in the first three months of this year, far fewer than the 4m it added in the first quarter of 2021 and well below analysts’ expectations that also stood at 4m.
Netflix shares dropped to $402 in pre-market trading on the Nasdaq on Friday, down almost $100 from Thursday’s closing price. The fall would wipe about $46bn from the group’s market value. Nasdaq 100 futures were down about 0.5 per cent in European dealings on Friday, while Europe’s Stoxx 600 tech index was down 2.1 per cent.
Netflix’s disappointing forecast came as Peloton was forced to rush out preliminary second-quarter earnings to shore up investor confidence after CNBC reported the company was temporarily halting production of its connected fitness products. Shares in Peloton, one of the biggest beneficiaries of early Covid-19 lockdowns, fell about a quarter following the report.
John Foley, Peloton’s co-founder and chief executive, said “rumours that we are halting all production of bikes and [treadmills] are false” but conceded the company was “right-sizing our production . . . as we evolve to more seasonal demand curves”. Peloton’s market value has plummeted in the past 12 months to less than $8bn, from $50bn.
Netflix and Peloton were among a clutch of “stay at home” stocks that investors snapped up at various stages of the pandemic, and the sharp decline in their share prices came amid growing investor angst over shares in companies that benefited from the pandemic.
BlackRock’s “virtual work and life” ETF, which was launched during the first wave of the virus to track companies that would prosper from people spending more time at home, is trading close to a record low. It is down 9 per cent since the start of the year and more than 40 per cent below the peak it hit last year.
Shares in Zoom, the videoconferencing service that became ubiquitous as people worked from home, have fallen more than 11 per cent since the start of the year. Other pandemic beneficiaries such as e-signature specialist DocuSign and Netflix rival Roku have tumbled more than 20 per cent in 2022.
Investors have also soured on the tech sector in anticipation that the Federal Reserve will raise interest rates more quickly than previously expected to tame soaring inflation. Higher rates reduce the value investors place on future profits of fast-growing companies. The tech-heavy Nasdaq Composite index entered correction territory this week, meaning it has fallen more than 10…
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