Netflix sinks as Wall Street flees 'stay-at-home' stocks

NEW YORK - One day after shares of at-home fitness company Peloton tumbled, Netflix found itself in Wall Street's hot seat Friday as markets reassess the diminishing growth prospects of so-called "pandemic stocks."

The streaming video service lost some $40 billion in market capitalization after releasing results Thursday night that projected growth of just 2.5 million subscribers in the first quarter, its slowest expansion since 2010 and a big downshift from the 55 million subscribers over the last two years as Covid-19 transformed daily life.

Netflix shares finished 21.8 percent lower, a similar level to that experienced Thursday by Peloton, which recovered some of its losses on Friday.

Such sell-offs are a particularly brutal manifestation of a market dynamic that's been going on for months in stay-at-home equities, whose investment thesis has worsened with the lessening risk of pandemic-caused lockdowns.

Gregori Volokhine, president of Meeschaert Financial Services, notes that Netflix, Amazon, PayPal, eBay and Etsy have all fallen between 20 and 50 percent from their peaks.

"More people are going out and leaving their homes," Volokhine said. "This trend has been going on for months."

Many of these companies attained valuations built on the idea that the fast growth seen during the pandemic would continue.

"Theoretically... these are growth stocks in that you were supposed to grow into your valuation with higher earnings," said Kim Forrest, chief investment officer at Bokeh Capital Partners, adding that the calculus changes "if you aren't growing."

The company most identified with the at-home pandemic bet may be Peloton, which saw trading suspended four times on Thursday following a report by CNBC which cited internal documents and said Peloton would pause the making of its Bike product for two months.

In a memo to staff late Thursday, Peloton Chief Executive John Foley said, "rumors that we are halting all production of bikes and treads are false."

But Foley said the company was "resetting our production levels for sustainable growth." He also opened the door to staff layoffs, saying "we now need to evaluate our organization structure and size of our team."

After losing 23.9 percent on Thursday, Peloton shares jumped 11.7 percent by the close Friday.

AFP