Streaming giant Netflix Inc. (NFLX) is witnessing one of its worst years to date, with its stock trading near the $380 range, significantly lower than its all-year high of $700.99. Investors have shunned the stock after Netflix reported Q4 revenue and subscriber misses on January 20.
Year-to-date, NFLX has already lost 35.7% in value, while the S&P 500 companies Index has lost only 7%. NFLX shares closed at $384.36 on January 28.
CEO Buys the Dips
While the market is punishing the stock for the weak results, some people still believe in the potential of the stock and view the current dip as an attractive entry point.
According to a regulatory filing, Netflix Co-CEO Reed Hastings has bought $20 million worth of shares in the past week. Hastings purchased 51,440 shares at an average price of $388.83 on January 27 and 28, through a family trust. Following the purchase, the trust now owns around 5.16 million NFLX stock.
Another believer in the company’s potential, Bill Ackman’s hedge fund Pershing Square Capital Management, bought more than 3.1 million shares of NFLX, making them a “top-20 shareholder in the company.”
In its Q4 results, Netflix reported earnings of $1.33 per share, beating analysts’ estimates of $0.82 per share. However, revenue came in at $7.71 billion, marginally missing the consensus estimate of $7.72 billion.
In Q4, Netflix added 8.28 million global net subscribers, falling short of both the consensus estimate of 8.33 million and its guidance of 8.5 million net adds.
Recently, Morgan Stanley analyst Benjamin Swinburne reiterated a Hold rating on the stock with a price target of $450, which implies 17.1% upside potential.
About NFLX’s results, Swinburne believes the company’s miss is due to the product saturation and increasing competition, which is resulting in lower long-term margins for the players in the sector.
Overall, the stock has a Moderate Buy consensus rating based on 16 Buys, 15 Holds, and 3 Sells. The average Netflix price target of $523.85 implies 36.3% upside potential to current levels.
According to TipRanks’ Insider Trading Activity tool, the Insider Signal is currently Neutral on Netflix, with corporate insiders buying $14.6 million shares in the last quarter.
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