Netflix (NASDAQ:NFLX) impressed investors with its Q3 performance, delivering better-than-expected subscriber numbers. Further, it recently launched its basic ad-supported subscription plan to boost subscriber growth. These positive developments have led renowned hedge fund managers like Ray Dalio to increase their holdings in NFLX stock. However, in aggregate, hedge funds have been net sellers of Netflix stock.
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TipRanks’ Hedge Fund Trading Activity tool shows that hedge funds sold 42K NFLX stock last quarter. Sellers include Frank Sands of Sands Capital Management LLC and Catherine Wood of ARK Investment Management LLC, among others.
While Netflix is taking measures to boost its paid subscriber growth, the above figures indicate that hedge fund managers remain skeptical. Additionally, a couple of analysts are doubtful about the ad-supported tier.
Raising concern over the new low-priced subscription plan, Needham analyst Laura Martin said, “In fact, since the new ad-lite tier is 30% cheaper than NFLX’s current lowest-price $10/month tier in the US, even faster adoption by this tier could result in negative rev growth near-term.”
Martin recommends a Hold on NFLX stock. She added, “We worry about rising churn and NFLX’s mix shift toward lower ARPU (average revenue per user) geographies.”
Meanwhile, Rosenblatt Securities analyst Barton Crockett sees Disney+ (NYSE:DIS) as a better ad play in 2023. He suggests a Hold on NFLX stock.
What’s the Prediction for NFLX Stock?
On TipRanks, NFLX stock is a Moderate Buy based on 13 Buy, 14 Hold, and four Sell recommendations. These analysts’ average price target of $284.20 implies an upside of about 9.9%.
Bottom Line
Hedge funds are famous for generating market-beating returns. Thus, it is crucial to keep a close watch on their moves. As for NFLX, hedge funds selling its stock is a negative sign.
The company is facing increased competition, saturation in developed markets, and macro uncertainty that could hurt its growth. Also, NFLX scores a six out of 10 on TipRanks’ Smart Score system, indicating a Neutral outlook.
