Netflix Inc. was one of the biggest winners in the early days of the pandemic, when people took refuge in place and switched to content streaming, but subscriber dynamics slowed for more than a year after the COVID crisis -19.
The company’s story may be more complicated than simply when a person who flies high COVID-19 returns to earth when life returns to normal. From Netflix
latest results and prospects, This has surpassed expectations, is sure to spark a “heated debate” over how slow Netflix may have been due to demand being pulled forward in the early days of the pandemic and how much could be the result of weaknesses. Another factor, according to Bernstein analyst Todd Juenger.
Share by Netflix
fell 6..8% in trading on Wednesday afternoon, enough to turn them into the S&P 500 index
the biggest discount ones.
For his part, Juenger argues that Netflix’s subscriber problems are “mainly” due to the rapidly increasing demand during the pandemic, which could see a shift in the balance of the number of additional subscribers. than last year.
“If one believes that the ‘normal’ annual growth rate over this life cycle period is 25-30 million [net additions]and FY2020 distributing 37 million (i.e. + 8-9 million vs. ‘normal’), perhaps FY21 would be expected to deliver around 8-9 million below ‘normal’. ‘. -envelope math “comes close” with his new base case subscriber count forecast, forecast to hit 21 million net additions this year with the majority of that weighted by the second half year 2021.
Thinking about the two-year overall period, Juenger wrote that 37 million net additions by 2020 coupled with an estimated 21 million net additions for 2021 would yield a total of 58 million, “close to the high of ‘average’. often’.”
He admits that the pandemic’s impact on subscriber addition times may not be the only reason for the recent slowdown, pointing to comments from Netflix’s management team on the first half of the year. is expected to be lighter from a content perspective because the COVID-19 Crisis disrupted production.
While Juenger argues that Netflix’s value proposition is more about the breadth of the content than the new blockbuster movies, he says that Netflix’s overall add-ons “can definitely” increase hits. “. At the same time, he “flatly declined[ed]”Netflix’s disappointing subscriber outlook and growth idea signals that the streaming market, or the company itself, is nearing maturity.
Juenger rated the stock better but lowered its price target to $ 617 from $ 671.
Stifel analyst Scott Devitt also thinks that recent trends are due to difficult comparisons with earlier periods of pandemic-induced strength.
Devitt wrote in a client note: “We were waiting for Netflix to get a quarter where the pull-forward became apparent and the 1Q: 21 result was right at the time,” Devitt wrote in a note. for customers. He expects that Netflix will take 3 to 9 months to make steep comparisons to the results caused by the pandemic, after which investors may see “a period of years that Coupons can reach the right rate for revenue growth or ~ 15% per annum, allowing some compression with increased operating margins. “
He upgraded his stock to buy from holding while increasing his price target to $ 560 from $ 550.
Guggenheim’s Michael Morris argues that a programming phase in the second half of the year will be the key to driving the rise again in membership trends after the latest numbers are used to “rock trust”.
“We are confident in global video streaming opportunities across the industry but believe that results and guidance will call in the final long-term membership levels and the cost to acquire and maintain,” he wrote. Membership is a matter of concern ”. “This could make Netflix a ‘show me’ story at least until second quarter earnings.”
Morris has a buy rating but has lowered its price target to $ 600 from $ 625.
Needham’s Laura Martin was a little more disappointed when she wrote that the company faced competition issues that could affect its market share.
“In our opinion, spending more money on entertainment content won’t work for new streaming competitors who are innovating in pricing, bundle, variety (i.e. sports and live news), business model, etc., ”she wrote while reiterating an inefficiency review. “We believe that hit entertainment is necessary, but not enough, to compete in future streaming wars.”
According to FactSet, at least 14 analysts lowered Netflix’s stock price target after getting the latest results, while one analyst increased their target. Of the 43 analysts tracked by FactSet, who cover Netflix stock, 32 have an equal buy rating, six have a hold rating and five have a sell rating, with an average price target of $ 608.46.
Netflix shares have fallen 12.2% in the past three months even though they are up 17.3% in the 12-month period. The S&P 500 is up 7.3% in three months and 51.6% in 12 months.