Netflix shares dropped 6% in premarket trading on Wednesday after the company cut its full-year advertising forecast and issued a tepid fourth-quarter profit outlook, deepening concerns about slowing viewership and revenue growth.
The stock has declined more than 26% this year and, if current losses hold, the streaming giant is set to shed about $17 billion of its market value.
The share performance underscores the mounting challenges facing Netflix, from losing a bidding war for Warner Bros Discovery earlier this year to defending its paid subscription model against free digital rivals and competing in an increasingly consolidated streaming market.
As viewers shift toward free, user-generated platforms such as YouTube and TikTok, Netflix is also contending with changing preferences in favor of short-form video over premium content.
“Netflix is still the leader in streaming, but the competitive landscape for people’s attention is much broader than streaming alone, particularly with the growth of short-form video,” said Ben Barringer, head of technology research at Quilter Cheviot.
Netflix co-CEO Sarandos says ‘we could do better’ after weak forecast
The company needs to ensure its content remains compelling enough to keep viewers engaged, rather than simply retaining them as subscribers, Barringer said.
Netflix is also undergoing a restructuring after cutting about 6% of its workforce and reshuffling its leadership team this month.
Co-CEO Ted Sarandos said on Tuesday the company plans to focus on its core business of producing quality TV shows and movies to make Netflix a must-have service, and the recent executive shakeup was a step toward that goal.
At least 14 brokerages have lowered their price targets on the stock after the results, according to data compiled by LSEG.
Netflix trades at nearly 18.28 times expected earnings over the next 12 months, compared with 14.76 times for Walt Disney and 6.26 times for Comcast, underscoring the premium investors place on the streaming giant.