Roku shares declined nearly 7% in early morning trading, and Walt Disney shares fell close to 5%. Shares of Netflix plunged 37% in heavy selling on Wednesday, after the company forecast a loss of two million subscribers in the current quarter. Netflix also reported it lost 200,000 subscribers in the first quarter, blaming increased competition and password sharing for hurting growth. Netflix shares are currently down 63% year-to-date, and nearly 70% off their all-time highs reached in November of 2021.
The question for investors is whether Netflix’s problems are specific to the company or whether there is “streaming fatigue” for viewers as pandemic restrictions ease. Disney may be the most vulnerable, with three large streaming businesses under its umbrella with Disney+, Hulu, and ESPN+. Last month, Disney announced plans to roll out a cheaper, ad-supported Disney+ plan in the U.S. Netflix and AppleTV are the only major streaming services that don’t offer a lower-cost, ad-supported option. Netflix now says it is exploring offering a lower-priced ad-supported version of the platform to boost its subscriber base. In a meeting with analysts, co-CEO Reed Hastings says an ad-supported version of Netflix makes a lot of sense.
"The stunning decline in shares of Netflix have now wiped out all of the gains the stock has made since 2018", said Caleb Silver, editor-in-chief of Investopedia. "Keep in mind that Netflix is one of the most widely-held stocks among tech index funds and ETFs, with some 265 exchange-traded funds holding it. Even if you don't own the stock outright, you likely own it if you are invested in the most popular ETFs and index funds across the technology sector."