Uh-oh, the Dreaded Cramer Curse Strikes Again: Netflix Is Now Down Over 62 Percent Since the Date Jim Cramer Urged Investors To Buy the Stock
Netflix (NASDAQ:NFLX), the world's largest subscription-based content streaming and production company, just became the latest stock to fall victim to the dreaded Cramer curse.
To wit, CNBC's Jim Cramer had tweeted a buy recommendation on Netflix stock on the 03rd of January.
Netflix! BUY !
— Jim Cramer (@jimcramer) January 3, 2022
Since then, however, the stock has been on a one-way path to stock market purgatory along with the rest of the high-growth, high-beta stocks. Nonetheless, with the stock now down over 60 percent since the start of the year, Netflix's plunge has been truly astounding. Let's delve deeper.
Netflix had announced its earnings for the fourth quarter of 2021 on the 20th of January 2022. Against its own guidance of 8.5 million net additions to its subscriber base, Netflix had reported additions of just 8.28 million, falling short of consensus expectations of 8.3 million additions.
Before this earnings announcement, Netflix had closed at $508.25. By the 26th of January, the stock was trading at $359.7, corresponding to a loss of 29 percent in just 4 trading days.
This brings us to Netflix's fateful Q1 2022 earnings on the 19th of April. The stock had closed at $348.61 before its earnings announcement. What followed, however, was nothing short of a disaster. The company reported a loss of subscribers for the first time since 2012, registering a decline of 200,000 in its subscriber base against its own guidance of 2.5 million net additions during the quarter. Bear in mind that the company recently wound down its operations in Russia, resulting in a loss of 700,000 subscribers. Without this externality, the company would have reported a growth of 500,000 subscribers. Nonetheless, the real shocker was the company's guidance for Q2 2022, projecting a loss of around 2 million in its subscriber base.
Netflix had ended yesterday's trading session with a loss of over 35 percent, bringing its cumulative decline since Cramer's endorsement to 62.14 percent.
Bear in mind that the COVID-19 pandemic had brought forward much of the streaming demand during the preceding two years. However, with the pandemic now receding from wide swathes of the globe, that demand boost is also normalizing. Additionally, this pandemic-driven boost had served to mask the true extent of the damage that Netflix was suffering due to increased competition from the likes of Disney Plus, Apple TV Plus, and HBO Max. With that crucial buffer now eliminated, Netflix is facing the stark reality of cutthroat competition in the streaming sphere. Add to this a general decline in programming quality, and you have the perfect recipe for disaster.
Of course, Netflix is planning to curb this downturn by adding a lower-priced, advertisement-supported subscription tier. Moreover, it also plans to crack down on password sharing, a phenomenon that had played a crucial role in propelling Netflix to its 2020 heydays. The company estimates that around 100 million households in the US are accessing the service via someone else's password. Theoretically, a clampdown on this practice can yield sizable net additions. However, this move can also backfire spectacularly in an age when streaming services are a dime a dozen.
The final blow to Netflix's short-term bullish thesis came yesterday when the billionaire fund manager Bill Ackman liquidated his $3.1 billion stake in the company at a loss of $435 million.
Of course, this is not the first time the infamous Cramer curse has struck recently. As we had noted in a dedicated post back in March, Jim Cramer recently endorsed Ford (NYSE:F), predicting that the legacy automaker's electrification drive under the ambit of its Ford Model e initiative would "destroy Tesla's, $TSLA, plan."
Do you agree?
— unusual_whales (@unusual_whales) March 2, 2022
Watch the entire clip here:
Well, unlike Netflix, Tesla (NASDAQ:TSLA) just reported stellar earnings for Q1 2022. Consequently, the EV giant's stock is now down just around 18 percent year to date, after having suffered deeper losses back in February. On the other hand, Ford shares are now down over 26 percent since the start of the year.