Streaming giant Netflix (NFLX) is conducting a fresh round of layoffs, this time letting go 300 employees globally to curb the rising costs, as per a CNBC report. This adds to the 150 employees laid off in May due to its decelerating growth.
Shares of NFLX gained 2.2% yesterday on news that the company is in talks with multiple suitors for an ad-partner tie-up. Meanwhile, NFLX stock has lost a staggering 70% of its value year-to-date.
The latest round of layoffs relates primarily to employees in the U.S. and Canada, representing 3% of Netflix’s global workforce. Although the company does not plan to have any further work reductions, internal restructuring steps may or may not fill the vacant positions.
Furthermore, Netflix is giving out severance packages equating to four months’ pay and increases depending on seniority and other factors, a person familiar with the matter said.
As the pandemic-driven binge-watching faze faded, Netflix’s subscriber base started diminishing, as first reported in April. The company is struggling to hold onto viewership and is undertaking steps to earn revenue from alternative sources and reduce its dependence on subscription fees.
A Netflix spokeswoman stated, “While we continue to invest significantly in the business, we made these adjustments so that our costs are growing in line with our slower revenue growth.”
“We are so grateful for everything they have done for Netflix and are working hard to support them through this difficult transition,” she concluded.
Analysts’ Take
Yesterday, Bank of America (BAC) analyst Nat Schindler slashed his price target on NFLX stock to $196 (7.9% upside potential) from $240 and maintained a Sell rating.
A survey of nearly 1,200 U.S. consumers from cross-sectional demographics and geographics indicates that Netflix is currently a top choice for consumers with “a must-have service by a wide margin.”
However, Schindler believes that the streaming giant is becoming more of a commodity, with customers adding a whole range of other streaming channels alongside Netflix. The viewership metrics across all streamers may be hampered should the recession appear. On the other hand, if the recession withholds, Netflix’s competitors may be in an advantageous position to scoop higher revenue from the already established ad-tiering business.
Overall, NFLX stock has a Hold consensus rating based on nine Buys, 26 Holds, and six Sells. The average Netflix price target of $280.42 implies 54.3% upside potential from current levels.
Website Traffic
TipRanks’ Website Traffic Tool provides insight into Netflix’s diminishing website visits. In January 2022, the total global estimated visits across all devices peaked at 1.03 billion, followed by 862.7 million visits in February, 872 million visits in March, and 765.5 million visits in April.
Notably, in May, Netflix website traffic recorded a 6.77% year-over-year increase in monthly visits. However, year-to-date website traffic growth decreased by 19.08% compared to the same period last year.
Ending Thoughts
Netflix is committed to increasing its revenue stream and controlling costs. Though in the short term these efforts may hurt, in the long run, the steps will position the company well for a positive growth trajectory.
