Netflix stock plunges 37% on shocking subscriber loss

Shares of Netflix plunged 37% Wednesday morning after the streamer reported earnings Tuesday evening that showed it lost subscribers for the first time in more than ten years. The results and weak outlook led to a wave of downgrades from Wall Street over fears of the company's long-term growth potential.

Netflix said several headwinds are impacting growth, including competition and the easing pandemic restrictions. The company had been significantly boosted by coronavirus stay-at-home orders, as more people sought out digital entertainment. But people spent less time on digital platforms as vaccines rolled out and mandates eased.

Slower household broadband growth also played a role in the company's weak forecast. Netflix estimated 100 million households are sharing their subscription passwords with other family or friends, making it harder to grow memberships. 

The company laid out changes in the pipeline to contribute to growth. It's considering a lower-priced ad-supported tier and suggested a crackdown on password sharing is coming. And while analysts seemed generally positive about these changes, they mostly believe those changes will take a year or two to be meaningfully implemented. 

"Although their plans to reaccelerate growth (limiting password sharing and an ad model) have merit, by their own admission they won't have noticeable impact until '24, a long time to wait on what is now a 'show me story,'" Bank of America analysts said in a Wednesday note. The firm was one of at least nine companies to downgrade Netflix on the disappointing report. 

"After what can only be called a shocking 1Q subscriber miss and weak subscriber & financial guidance we reduced our subscriber forecasts and pushed back our profitability forecasts substantially," Pivotal analyst Jeffrey Wlodarczak wrote in a Tuesday note. The firm downgraded the stock to sell from buy.

Wells Fargo analysts wrote in a Wednesday note that downgraded the stock to equal weight that "negative sub growth and investments to reaccelerate revenues are the nail in the NFLX narrative coffin, in our view."

Several streaming services' stocks took a dive Wednesday morning along with Netflix as investors wait for updates on their growth. Shares of Disney were down about 5% after markets opened on Wednesday. Similarly, shares of Roku were down about more than 7%, Paramount stock slumped 11.7% and Warner Bros. Discovery slipped by about 5%.

"Gross adds activity continues to be softer than expected, as such, subscription companies could see similar pressures throughout this earnings season, though we note NFLX is unique in that it is much more penetrated, particularly when accounting for password sharing," Wolfe Research said in a Tuesday note. The firm maintained its outperform rating.

—CNBC's Michael Bloom contributed to this report.