Netflix Analysts
Rosenblatt Securities analyst Barton Crockett maintained a Neutral rating on Netflix shares and reduced the price target from $354 to $245.Raymond James analyst Andrew Marok maintained a Market Perform rating.
KeyBanc Capital Markets analyst Justin Patterson maintained a Sector Weight rating.
Rosenblatt: Cheap, Ad-based Services Gain Share
Netflix expects subscriber growth to be positive for the year and maintain its 19 percent–20 percent operating margin guidance for 2022, Crockett said. The company now expects operating margins to be flat, as opposed to its earlier expectations for an average annual margin expansion of 19 percent–20 percent.As fixes, the company said it will clamp down on 100 million households with shared passwords globally and offer a cheaper version of the service with ads, the analyst noted. The former will ramp in 2023 and the latter in 2024.
Crockett doesn’t see the trouble at Netflix seeping down to Roku Inc., as the streaming giant does not pay fees to Roku. Roku is levered to ad-based streaming, which is gaining share, the analyst said.
Raymond James: Netflix Shares Appropriately Valued
Netflix attributed the disappointing first-quarter numbers and weak second-quarter guidance to the impact from exiting Russia, increasing penetration, competitive pressure and an uptick in churn following price increases in the United States and U.K., Marok said.The company said revenues will continue to remain under pressure, the analyst noted.
The two avenues Netflix banks on for revenue re-acceleration, namely password sharing crackdown and ad-supported option, are only in the testing phase and implementation could take 18 to 24 months at the earliest, Marok said.
“Though the company expects a return to subscriber growth in the back half of the year from seasonal strength and a stronger content slate, the emphasis has clearly shifted to monetization in the near term as demand remains uneven,” the analyst said.
KeyBanc Sees 3 Challenges
There are more friction points to paid net add growth, Patterson said. Fixing these will take at least 18 to 24 months, he added.Needham Positive on Ad-Supported Model
Martin attributed the upgrade of Netflix shares to the company’s decision to introduce a low-priced advertising tier over the next 16 to 36 months.The analyst, however, said she remains worried about the company’s near term due to slowing year-over-year revenue growth, weak second-quarter guidance, rising subscriber churn, employee churn, lower opex guidance, U.S. saturation, and inadequate entertainment focus.
