Netflix and Paypal drag Wall Street and Nasdac into choppy waters
Wall Street ended divided on Wednesday, April 20, with the Dow Jones supported by good corporate results while technology stocks were weighed down by the collapse of the streaming group Netflix.
“The big story of the day was Netflix,” summarized Art Hogan of National Securities. “It was a day centered around corporate results and Netflix soaked up all the oxygen of the session,” the analyst commented.
The streaming pioneer’s stock crashed spectacularly on Wednesday, April 20, losing 35.12% to USD 226.19, the most in a decade, with the U.S. giant’s valuation melting down to USD 50 billion, according to financial analysis tool Factset. Netflix surprised investors on Tuesday by announcing after the close of the market a profit in the first quarter, and especially the flight of 200,000 subscribers while the streaming pioneer was hoping to gain 2.5 million.
It took place for the first time and it was yesterday, Netflix was down and lost subscribers. It had not happened for the first time also that the action falls in such a proportion. This dragged other entertainment groups like Disney (-5.55%), Roku (-6.17%) and Warner Bros Discovery (-6.04%) into the red. Netflix blamed the erosion of its customer base in the past quarter on the suspension of its service in Russia.
Netflix also suffered from the backlash of the subscription boom that the COVID-19-related lockdowns had created. This influx of subscribers has dried up with the recovery of the business. In addition, the intense competition that has blossomed in streaming and inflation have weighed on the group’s performance, and it is now considering advertising funding.
“Netflix says it expects another 2 million fewer subscribers in Q2 and is starting to figure out how to charge the 10 million users who enjoy it for free by sharing access codes,” noted CFRA analyst Kenneth Leon, who lowered his stock price estimate.
The Dow Jones index on the other hand was supported, before losing momentum before the close, by good results announced by heavyweights of the index such as Procter & Gamble (+2.45% to 163 USD). The manufacturer of Gillette razors and Pampers diapers reported on Wednesday a strong increase in quarterly sales and better than expected thanks to higher prices for the products the manufacturer markets.
On the other hand, IBM, another member of the flagship stock index, climbed 7.10% to $138.32 after reporting a better-than-expected quarterly profit on Tuesday after the close, thanks in part to more activity in its cloud offering (remote computing). Among the indicators, the sales of old houses fell in March in the United States, for the second month in a row, the buyers being penalized by the inflation to which is added now the rise of the interest rates, while the prices of houses continue to climb.
The National Federation of U.S. Realtors released some figures with home resales down 2.7% from February and 4.5% from March 2021. The median price of a home reached USD 375,300, a record high and 15% higher than this time last year. On a positive note for equities, bond yields eased, with yields on 10-year U.S. Treasuries sliding to 2.84% from 2.93% the previous day.
The other big faller was Paypal stock, which took notice by dropping 8.45% to USD 94.90, near its lowest level in a year, following a downgrade by analysts. Just Eat Takeaway.com’s stock rose 1.93% to USD 26.60. The group, which has acquired meal delivery company Grubhub for USD 7.3 billion since last year, is considering selling it as delivery orders have been falling since the end of the lockdown.