The Number of Netflix Bulls Is Dwindling
Even in a year that has seen widespread selling of technology stocks and long-time market leaders fall into bear territory, the woes of Netflix Inc. stand alone.
Netflix, a video-streaming company, has plummeted 69% this year, abandoned by both investors and analysts as back-to-back disappointing quarterly reports raised concerns about user trends in an industry that’s becoming more competitive and losing its pandemic-related tailwinds. The drop is the most of any Nasdaq 100 or S&P 500 component, and much worse than the former index’s 26% decline.
Shares of Netflix gained 0.6% in early trading on Tuesday.
The growth outlook has weakened to the point that Netflix has cut hundreds of jobs and changed its tune on two longstanding principles: it is cracking down on password sharing, and will introduce an ad-based subscriber tier to the platform. That’s on top of a backdrop where high inflation has pushed the Federal Reserve to hike rates sharply, sparking recession fuels and fueling a rotation out of tech.
The scale of the challenges suggest it will be tough for Netflix to regain a valuation that exceeded that of Walt Disney Co.’s as recently as December. Now, “The Lion King” parent is worth more than twice the home of “Tiger King.”
“We’ve seen a lot more competition, and the cost for Netflix to continue competing has gone up, which hurts the expectation that earnings were going to grow at aggressive rates for a long time,” said Jeremiah Buckley, who oversees nearly $48 billion as a portfolio manager at Janus Henderson Investors.
Estimates for Netflix are moving in the wrong direction. The consensus for this year’s revenue now stands at $32.4 billion, which although representing year-on-year growth of 9.2%, is down from the $34.1
Read more on tech.hindustantimes.com
