According to a report published by Reuters, Netflix, Inc. (NASDAQ: NFLX) has laid off around 2% of its workforce, or nearly 150 people, mostly in the U.S. and Canada, due to deaccelerating growth.
The company said, “These changes are primarily driven by business needs rather than individual performance, which makes them especially tough as none of us want to say goodbye to such great colleagues.”
The decision to cut jobs follows the company’s loss of subscribers for the first time in over 10 years. The video streaming giant lost 200,000 subscribers in the first quarter of 2022 and expects to lose another two million subscribers in the second quarter.
The California-based company said fierce competition and the Russia-Ukraine conflict have led to the subscriber loss. Netflix plans to monitor its spending as well as launch a cheaper, ad-supported subscription service in order to boost growth.
“We’re trying to be smart about it and prudent in terms of pulling back on some of that spending growth to reflect the realities of the revenue growth of the business,” CFO Spencer Neumann said during the company’s first-quarter earnings call last month.
Wall Street’s Take
On May 16, Wedbush analyst Michael Pachter upgraded the rating on the stock to Buy from Hold with a price target of $280 (47% upside potential).
The analyst said, “Netflix’s decision to spread out content will give users a reason to retain their Netflix accounts.”
“In our view, this experiment will be a resounding success if expanded to all Netflix originals, and we believe the company will ultimately move in that direction. Investors will see an uptick in subscribers and their confidence in the Netflix business model will be restored,” Pachter added.
Nat Schindler of Bank of America Securities has a Sell rating on Netflix. He has lowered the price target to $240 (26% upside potential) from $300.
Schindler said, “While the company initially drove new subscriber adds by offering original content, the new wave of acceleration will likely be driven by pricing.”
Overall, the stock has a Hold consensus rating based on eight Buys, 28 Holds and three Sells. NFLX’s average price target of $299.93 implies 57.4% upside potential.
Website Traffic
TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (NYSE: SEMR), the world’s biggest website usage monitoring service, offers insight into Netflix’s performance.
According to the tool, Netflix’s website traffic registered a 12.2% fall in global visits in April, compared to March. Further, the footfall on the company’s website has declined almost 16% year-to-date against the same period last year.
Conclusion
NFLX stock has lost 51.3% over the past three months, 72.1% during the last six months and 60.8% over the past year. Further, its decision to lay off its staff could shake investors’ confidence.
Learn more about the Website Traffic tool in this video by Youtube sensation Tom Nash.
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