April 20, 2022 premarket reports have investors and market watchers wondering why Netflix stock is plummeting. The company will be devalued by approximately $40 billion if this drop holds when the market opens.

A +30% drop in Netflix stock came directly after the company released its first-quarter report for 2022. The streaming service lost 200,000 subscribers in the first three months of this year alone. 

This was a drastic difference from the 2.5 million subscriber increase they projected.

However, why this crash occurred is not something completely out of the left field. Here are the factors over the past year that played a role in Netflix’s stock decline. 

The market was already changing

During the pandemic, Netflix stock shares went up 86%. This is not a surprise. People were working and spending a majority of their time at home. 

As the world returns to work, things have changed. The company’s stock was already down 40% at the beginning of 2022 from its 2021 value. 

However, Netflix attributed additional reasons for their underperformance. 

Password sharing ruined Netflix stock?

When Netflix addressed the results of the first-quarter report, they cited global events, the economy, and password sharing among users. 

First, the representatives of the major entertainment company spoke about inflation. 

In a statement for CNN Business regarding the crash of Netflix stock, CMC Markets Chief Market Analyst Michael Hewson said: 

“Food and energy are people’s priorities right now, not watching ‘Stranger Things.'”

The Russian invasion of Ukraine was also brought up. Netflix pulled its service completely out of Russia upon the start of the war. As a result, this withdrawal lost them 700,000 subscribers. 

Finally, the prevalence of consumers sharing their passwords came up as a concern. The company stated they had strategies they were going to implement to handle this without hindering user experience. 

This sounds like a lot of excuses at the end of the day. While all of these elements can affect a company, they had the potential to withstand it at their massive size.

At some point, the company was not delivering enough value to their customers to make a difference. 

Always overdeliver and be great,

Grant Cardone  

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