Netflix had $47 billion wiped off its value in the opening minutes of trading in New York after reporting quarterly numbers that fell well short of investor hopes last night.
The streaming giant reported a drop in subscribers for the first time in a decade, causing shares to plunge 30%.
A string of City and Wall Street analysts cut their forecasts and target prices for the company in the wake of the poor quarterly numbers, which were the second disappointment in a row for Netflix.
The streaming service has now seen its market value decline by $160 billion since the start of the year.
“Rising competition, macro headwinds and market saturation will continue to weigh on sub growth,” said John Hodulik, an analyst at UBS.
Netflix signalled a move into advertising to allay investor concerns over falling subscriber numbers.
In a shareholder call late last night, CEO Reed Hastings said the company would introduce advertising on low-end subscription plans in a dramatic u-turn for the firm’s previous blanket opposition.
Hastings said he remained “against the complexity of advertising”, but said the move would offer greater consumer choice.
The announcement runs in stark contrasts to a 2019 shareholder letter when Netflix said staying out of advertising would make it “a more valuable business in the long term.”
“When you read speculation that we are moving into selling advertising, be confident that this is false,” the company said previously.
Russ Mould, investment director at AJ Bell, said: “The cost of creating shows and films continues to go up and Netflix is spending big on marketing to keep its brand in front of consumers, so it needs to think beyond subscription income in terms of money coming through the door.”
Netflix will also crackdown on account sharing in a bid to drive more sign-ups. It estimates as many as 100 million of its 222 million subscribers are sharing passwords.
Analysts and investors are wary of how long Netflix’s efforts to kick-start growth could take to bear results.
UBS’s Hodulik said: “While efforts to crack down on account sharing and a new ad-supported tier could enhance financial performance, we believe it will take 1-2 years for such efforts to play out and margins will remain stagnant as the company invests to restart growth.”
Dwindling subscriber numbers came in part due to the company’s withdrawal from Russia, which resulted in a loss of 700,000 customers.
But analysts said problems ran deeper, with rising competition from the likes of Disney+, Apple TV and Amazon Prime combined with a cost of living squeeze for customers around the world.
Mould said: “Signs of trouble have been growing stronger in recent months for Netflix and now we’ve had the full warning that growth is below expectations.
Paul Allison, head of equity research at Freetrade, said: “The company reported that subscriber growth had slowed to a pedestrian pace in their last set of earnings results. They also said that hit shows were becoming more important for sub growth as the streamer comes of age.
“It seems the ‘meh’ release slate in the first quarter, which included shows like Inventing Anna, didn’t do enough to tease viewers into the subscriber base in enough numbers to offset people churning out.”