Netflix, Inc. NFLX shares suffered a bloodbath on Wednesday, having shed over 35% in a single session, following its disappointing quarterly results and weak guidance.
One of the largest U.S. pension funds, which held a chunk of the streaming giant's shares, incurred a massive loss amid the plunge.
What Happened: The California Public Employees' Retirement System lost about $695 million of its Netflix bets following Wednesday's plunge. The largest state pension fund in the U.S., with $450 billion in assets under management, held 1,779,811 Netflix shares, valued at about $1.07 billion, at the end of the fourth quarter of 2021, 13F filing with the SEC showed.
At Wednesday's closing price of $226.19, CalPERS' 1,779,811 shares are now worth $402.42 million. This suggests a $669.4 billion shave-off from the value of the fund's holdings at the end of the fourth quarter.
Big investors are already jumping the Netflix ship. Billionaire investor Bill Ackman's Pershing Square Capital Management exited its position, the hedge fund manager said in a letter to shareholders. The firm reportedly lost about $400 million of its Netflix bets.
Related Link: Password Sharing Woes, Ads, 'ARM,' Price Hikes And More: Key Takeaways From Netflix's Q1 Earnings Call
Why It's Important: A turnaround may not be imminent at Netflix, sell-side analysts say. Higher penetration rates and intensifying competition could leave the company struggling in the near to medium term.
Netflix pointed to some measures it is taking — including cracking down on password sharing, running an ad-supported subscription plan and investing in content. All these could take 18-24 months to fructify, KeyBanc Capital Markets analyst Justin Patterson said in a note. The analyst also said operating margins could remain subdued due to investments made to drive revenue growth.
A slew of sell-side firms took down their price targets for Netflix shares drastically and recommended staying on the sidelines.
After Wednesday's more than 35% plunge, Netflix' shares were down an incremental 0.98% at $223.97 in premarket trading on Thursday, according to Benzinga Pro.
Related Link: Why BofA Cut Netflix Target Price By 50%
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