Netflix stock falls and closes at lowest level since April 2020 after disappointing earnings and Wall Street downgrades – Update – Deadline
UPDATED with closing course. Netflix stock, which entered Friday’s Nasdaq session already down 16% in 2022 to date, plunged 22% today alone on waves of sales and enchantment.
After climbing from an intraday low of $ 380 during today’s opening hours, it ended at $ 397.50, the worst closing price since April 2020. Trading volume was almost 20 times normal levels.
The route followed a fourth-quarter earnings report that disappointed many Wall Street analysts and investors and sparked a major debate about the outlook for streaming in general. While the company missed its fourth-quarter target for subscribers by just 200,000 (8.3 million additions vs. expected 8.5 million), the weak guidance for the current quarter triggered alarms. During their quarterly earnings interviews, top executives could not identify any reason for the decline in subscriber growth, but instead reiterated confidence in their overall trajectory. “For now, we̵[ads1]7;re just staying calm,” said co-CEO Reed Hastings.
Analysts largely did not stay calm. Downgrades and disappointing reports from them rained down, and many who chose not to lower their ratings on Netflix trimmed their price targets, acknowledging the weak moods. The most infamous bear on the stock, Michael Pachter of Wedbush Securities, issued a note to clients alluding to his long-term (and often misplaced) pessimism about Netflix. In the note, entitled “Even a broken watch is correct every ten years,” he described Thursday’s earnings report and management comments as an account. “We believe Netflix investors are just beginning to appreciate Netflix’s future status as a low-growth, extremely profitable business,” he wrote. “When they fully appreciate this, we expect Netflix’s stock price to fall further.”
Michael Nathanson of MoffettNathanson maintained his “neutral” rating on Netflix shares, but lowered the 12-month price target to $ 375 from $ 460.
In addition to pointing out the many reasons why he believes investors should put the brakes on Netflix, Nathanson made a broader point for each company that is racing to invest billions in streaming. Netflix fainting came at a time when a lot of red ink was spilled in the stock market, especially in the technology and media sector. Disney, whose valuation has been based on the focus on streaming, saw shares plunge 7%. ViacomCBS shares also fell by 7%. Pure-play power sales went worse. Roku shares fell 9%, as did FuboTVs. Crackle owner Chicken Soup for the Soul Entertainment fell 11%.
“For many years, we have walked alone down an empty and dark road and asked a simple question whether streaming is a good business,” Nathanson wrote in a customer note. “Many of our customers will say, ‘Of course it is! You fucking fool, look at the stock valuation and the huge stock return that Netflix has generated.’ In fact, along the way, we may even have lost a few customers who were tired of us mistaking the stock or were just too stupid or too stubborn. “
Based on the latest trends and the latest economy, Nathanson estimated that Netflix could potentially add just 6 million-11 million net new subscribers in 2022. “This seems shockingly low compared to the average of 26.5 million in the last five years,” he wrote. he. The analyst noted that he maintains a full-year forecast of more than 20 million, pending several disappointing revelations.
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Morgan Stanley’s Ben Swinburne downgraded Netflix to “equal weight,” with a $ 450 price target. In a note to customers, he characterized the stock as over-extended, its value based on previous perceptions of the company’s growth. “Commitment is growing, churn is declining, and Netflix clearly has pricing power, as evidenced by the recent 10% + US price increase,” he wrote. “But it turns out to be more challenging to bring the ever new member to the service than we expected.”
Not all the voices on Wall Street joined the negative chorus. Pivotal Research Group’s Jeffrey Wlodarczak cut some of his estimates for Netflix growth and shares, while confirming his “buy” rating on the shares. Not only is Netflix still the global leader with nearly 222 million subscribers, he noted, but it has other benefits as the world relentlessly turns to streaming. The company “continues to have a 5+ year lead over its peers with a broad focus across most demographics,” the analyst wrote in a note to clients. It is “ready to continue to be the dominant player globally in the transition to streaming (which in our view is in the middle round) away from traditional pay-TV, and we believe there are still significant global growth opportunities for subscribers / ARPU.”
