Case Study: What Credible analysts are saying on Netflix (NFLX) stock
Key Points
Performance
Netflix (NFLX) shares rose by nearly 5.5% this week. On a year-to-date basis, NFLX shares are now up by 16.12%. This compares favorably to both the S&P 500 and the Nasdaq Composite, which have risen by 3.88% and 7.25%, respectively, during 2023 thus far.
Event & Impact
Netflix announced Q4 results this week, causing the stock to soar. However, it appears that the post-earnings rally was based upon guidance, because during Q4 NFLX posted revenue that was in-line with Wall Street consensus and GAAP earnings-per-share of $0.12/share, which missed consensus estimates by $0.38/share.
Noteworthy News:
After 2022, a year in which Netflix posted net subscriber losses for the first time, the company provided strong growth guidance for 2023.
Nobias Insights
51% of recent articles published by credible authors focused on Netflix shares offer a “bearish” bias. while 4 out of the 6 credible credible Wall Street analysts who cover NFLX offer a “bullish” outlook. Yet, the average price target being applied to NFLX by these credible analysts is $361.17 which implies upside potential of less than 10% relative to the stock’s current share price of $342.50.
Bullish Take Nobias 4-star rated author, Patrick Seitz, said, “The streaming video leader late Thursday said it added 7.66 million new subscribers worldwide in the December quarter, ending the year with 230.75 million total subscribers.
Bearish Take Alex Sherman, a Nobias 4-star rated author said, “For the past three years, the global media and entertainment industry has been defined by the streaming wars. Each media company created a streaming service to compete. Only the strongest would survive, the narrative went. The losers would consolidate or die.”
NFLX Jan 2023
Netflix (NFLX) reported Q4 earnings this week, spending the stock soaring higher. NFLX shares rose by 5.5% during the week, pushing their year-to-date gains up to 16.12%. This compares favorably to both the S&P 500 and the Nasdaq Composite, which have risen by 3.88% and 7.25%, respectively, during 2023 thus far.
Bearish Nobias Credible Analysts Opinions:
Alex Sherman, a Nobias 4-star rated author, touched upon the stock’s recent struggles in a post-earnings report that he published at CNBC this week. Sherman said, “For the past three years, the global media and entertainment industry has been defined by the streaming wars. Each media company created a streaming service to compete. Only the strongest would survive, the narrative went. The losers would consolidate or die.”
During 2022, he noted, “For the first time ever, Netflix lost subscribers. Its shares fell more than 60%.”Yet, Sherman highlighted a positive momentum shift with regard to subscriber growth trends, that occurred during Q4. He said, “Netflix added 7.7 million streaming subscribers in the fourth quarter, blowing out analyst estimates, which were closer to 5 million. Netflix’s shares rose more than 6% after hours.” Sherman added, “Netflix’s big quarter doesn’t yet include results from forcing password sharers to pay, a process that will kick into gear soon.”
And regarding future growth prospects, Sherman concluded, “Netflix said it expects subscriber growth in the first quarter to be lower than the fourth quarter for general seasonality reasons, but it expects growth in the second quarter due to more customers signing up rather than losing the service as Netflix cracks down on sharing passwords.”
Shawn Johnson, a Nobias 4-star rated author, specifically covered Netflix’s password sharing crackdown plans in an article this week. Johnson wrote,”Netflix confirmed Thursday that it will crack down on account sharing “more broadly” in the coming months.” He continued, “This change will limit a Netflix account to users in a household instead of sharing it with multiple external users. Account holders who want to share with users outside the household can pay an additional fee to keep those profiles (though exact pricing hasn’t been released yet).”
Johnson highlighted a press release from the company’s Q4 earnings report, which stated, “Today’s widespread account sharing (100M+ households) undermines our long-term ability to invest in and improve Netflix, as well as build our business. While our Terms of Use limit use of Netflix to one household, we recognize that this is a change for members who share their accounts more widely.”
Lastly, he said, “The company warned that this would likely result in some customer cancellations in the short term, with Peters noting in the interview that it would not be a “universally popular move” but would lead to more revenue going forward.”
Bullish Nobias Credible Analysts Opinions:
Nobias 4-star rated author, Patrick Seitz, also covered Netflix’s Q4 results this week. In his article at Investors.com, Seitz also highlighted NFLX’s subscriber growth rebound, writing, “The streaming video leader late Thursday said it added 7.66 million new subscribers worldwide in the December quarter, ending the year with 230.75 million total subscribers.” Analysts polled by FactSet expected Netflix to add 4.57 million new subscribers.” “However,” he continued, “the Los Gatos, Calif.-based company missed Wall Street's sales and earnings targets for the fourth quarter.”
Seitz said, “Netflix earned 12 cents a share on revenue of $7.85 billion in the period. Wall Street had predicted earnings of 55 cents a share on sales of $7.86 billion. In the year-earlier period, Netflix earned $1.33 a share on sales of $7.71 billion.”
Regarding management’s future guidance, Seitz noted, “For the first quarter, Netflix expects to earn $2.82 a share on sales of $8.17 billion.” He continued, “Analysts were looking for earnings of $2.98 a share on sales of $8.15 billion in the March quarter. In the same quarter last year, Netflix earned $3.53 a share on sales of $7.87 billion.” “Wall Street cheered Netflix's free cash flow generation,” he wrote. Setiz noted, “The company reported $1.6 billion in free cash flow in 2022 and expects at least $3 billion in 2023. Analysts had been modeling $2.4 billion in free cash flow this year.”
Lastly, Seitz says that this strong cash flow generation is likely to result in shareholder returns. He concluded, “Also, Netflix said it plans to resume share repurchases in 2023. Another significant headline that broke alongside NFLX’s earnings results centered around a management shake-up at the company.
Dawn Chmielewski and Lisa Richwine covered this news in an article published at Yahoo Finance. Chmielewski is a Nobias 4-star rated author. The writers said, “Netflix co-founder Reed Hastings is stepping down as chief executive of the streaming video pioneer but will remain at the company as executive chairman, he announced on Thursday.” They continued, “Greg Peters, who was serving as chief operating officer and chief product officer, will become co-CEO alongside Ted Sarandos, Hastings said in a blog post.”
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
It’s often concerning to investors when a founder-led company loses that title. Yet, calming nerves, Chmielewski and Richwine reported, “Hastings, 62, said he planned to work with Sarandos and Hastings as executive chairman for "many years to come."’.
Overall bias of Nobias Credible Analysts and Bloggers:
Contrary to the stock’s post-earnings rally, 51% of recent articles published on NFLX shares by credible Nobias authors have expressed a “bearish” sentiment towards the stock. The credible Wall Street analysts who have offered opinions on NFLX shares are also bearish.
Currently, the average price target being attached to Netflix by these credible individuals is $361.17. NFLX closed the week trading for $342.50. Therefore, that average price target implies upside potential of less than 10%.
Disclosure: Nicholas Ward has no NFLX position. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
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Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.