The Netflix stock price has crashed sharply in the past few weeks as concerns surrounding its growth remained. NFLX is trading at $340, which is significantly below its all-time high of $702. This 51% drop has brought its total market cap to about $151 billion. It also makes it the worst performing FAANG stock year-to-date.
There are several reasons why the NFLX stock price has crashed. First, there is an ongoing rotation from lockdown stocks to those with a reopening twist. Indeed, most companies that did well during the lockdown, like Zoom Video, Teladoc, and Roku have all crashed. A good example of this is the performance of Ark Innovation Fund, which has lost over 70% of its value in the past few months.
Second, Netflix has started suffering because of the rising competition in the movie streaming industry. In the past few years, we have seen many people move to platforms like Disney+, which now has over 126 million users. Most of these people are from the US and are attracted by the company’s franchises like Pixar and Marvell. A good example of this is what happened in the fourth quarter when Netflix lost subscribers in the US.
Third, the Netflix stock price has crashed because of Russia. Recently, the company announced that it will exit the Russian market because of the Ukraine invasion. It is estimated that the company has over 1 million subscribers in the country. Therefore, assuming that the average price of the service is $10, it means that it will lose about $10 million per month and $120 million per year.
That is still a small amount considering that the firm had over $30 billion in revenue in 2021. Still, Netflix has found some love in Wall Street lately. Bill Ackman of Pershing Square Capital has announced a large purchase. At the same time, analysts at Edward Jones and Citigroup recently upgraded the stock. The least optimistic are analysts at Wolfe Research, Jefferies, Bank of America, and JP Morgan.
Netflix stock price forecast
The daily chart shows that the NFLX share price has been in a deep downward trend in the past few months. The shares managed to break below the key support level at $477, which was the lowest level in 2021. It has also crashed below the short and long-term moving averages and formed a break and retest pattern.
Therefore, there is a high likelihood that Bill Ackman is wrong and that the stock will keep falling in the next few months. If this happens, the next key support level to watch will be at $300. The bearish view will be invalidated at $400.
