By Adam Levine

Tech's troubles now go well beyond the AI trade. The recent selloff in Netflix stock is Exhibit A. The streaming pioneer has seen its stock fall around 11% in the last two days of trading.

Wall Street is split on the reasons for the sharp decline. Needham analyst Laura Martin pointed to Wednesday comments from Netflix's chief financial officer, Spencer Neumann, at an investor conference where he said that Netflix would continue to produce live events, but it won't be bidding on costly season-long sports packages. Martin said that could indicate lower-than-expected subscriber growth in the U.S.

But investors could also see that move as smart -- and a reason to send the stock higher. Sports programming remains incredibly expensive and traditional players like Walt Disney's ESPN are backing away from deals, not embracing them. Netflix doesn't need the brand recognition that comes with professional sports, which newer streamers may require.

Separately, a Thursday note from Robert Fishman, an analyst at MoffetNathanson Research, may have contributed to the selloff. Fishman noted that the subscriber growth from recent password-sharing crackdowns and a new ad-supported streaming tier could be coming to an end.

"How much more room can subscribers grow?" Fishman asked in a note to clients. "It is likely Netflix has a few more quarters of strong subscriber growth driven by its content slate and ad-tier, but we do expect the benefits of the password-sharing crackdown to slow."

Other analysts see Netflix's slide as a broader selloff in stocks that had previously avoided the 2025 tech stock declines, retaining high valuations. "Considering how other stocks moved that I would categorize as having frothy valuations, Netflix was not too much different," Morningstar analyst Matthew Dolgin told Barron's. "I also cover Spotify -- another company that I think is just outstanding and best of breed but too highly valued." Spotify fell 7.4% on Thursday.

A sampling of six internet companies that had largely escaped the 2025 selloff in tech saw their share prices go down by an average of 7.1% on Thursday, and all have declined through midday Friday.

"I just think it's a function of the market selling higher multiple companies, because if growth does slow down in the economy, higher multiple stocks usually, they suffer worse," analyst Jason Helfstein of Oppenheimer told Barron's.

As Netflix shares fell 3% on Friday, the tech-heavy Nasdaq Composite was unchanged.

Netflix shares are still up 45% over the last 12 months.

Write to Adam Levine at adam.levine@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

March 07, 2025 13:28 ET (18:28 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.