Once the bell rings to signal the end of today’s trading action, the Street’s attention will turn to Netflix (NASDAQ:NFLX), as the streaming giant will dial in its Q2 financial statement.
Sentiment around Netflix has changed considerably over the last 12 months. That is clearly evident in the stock’s performance, with the shares up by 149% over the past year. The shift is not only down to big tech names leading the market charge in 2023, but also down to the fact Netflix has taken two big initiatives to bolster its ailing business – adding an ad tier, and cracking down on households sharing passwords.
Having posted huge growth during the pandemic, Netflix faced some big challenges in the post-Covid landscape. Goldman Sachs analyst Eric Sheridan counts the normalization of post-pandemic subscriber growth, increased competitive pressure in the industry, and “potential pressure on subscriber gross additions from the consumer spending environment,” amongst the headwinds.
However, as the company moved to address these issues, Sheridan thinks Netflix “continues to execute against its global password and ad tier initiatives.”
“In short,” the 5-star analyst went on to add, “NFLX mgmt has executed its password sharing initiative in excess of our prior assumptions, has regained content creation momentum in a manner that has muted any post-pandemic growth headwinds and overall industry competition has become more muted (especially from traditional media companies) in the past six months.”
As far as the report goes, based on the available data, Sheridan expects Netflix to deliver a better showing than the Street modeled subscriber performance (consensus has around 1.77 million).
This is due to a combination of factors, including “solid content,” and more efficient enforcement of password crackdown measures compared to what was seen in Canada and Spain in the first quarter. Additionally, there is an overall increase in revenue from unpaid households transitioning to paid memberships, particularly the ad tier, and existing members contributing more revenue through adopting additional profile measures.
For now, however, based on “continued low visibility” from the pathway to further upside, Sheridan keeps a Neutral rating on the shares, backed by a $400 price target. That figure sits 16% below the current share price. (To watch Sheridan’s track record, click here)
Overall, 7 other analysts join Sheridan on the sidelines, and with an additional 18 Buys and 2 Sells, Netflix stock claims a Moderate Buy consensus rating. Going by the $448.22 average target, a year from now, the shares will be changing hands for a 6.5% discount. (See Netflix stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
