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Wall Street analysts have grown increasingly pessimistic about Netflix (NFLX) ahead of the streaming video leader’s first-quarter earnings report next week. Netflix stock has been a cellar dweller since the company delivered disappointing fourth-quarter results and forecasts in January.
The Los Gatos, Calif.-based company plans to report March-quarter results late Tuesday. Analysts expect Netflix to add 2.8 million new subscribers worldwide in the first quarter, vs. 3.98 million in the year-earlier period, according to FactSet. Netflix ended 2021 with 221.8 million global subscribers.
Wall Street forecasts Netflix earnings of $2.95 a share on sales of $7.94 billion, FactSet said. In the same quarter last year, Netflix earned $3.75 a share on sales of $7.16 billion.
On Wednesday, Monness Crespi Hardt analyst Brian White reiterated his neutral rating on Netflix stock. In a note to clients, White said a host of “nefarious forces” are weighing on Netflix. They include slowing growth and a weaker-than-expected global economy.
Netflix looks set to post its weakest revenue growth since the fourth quarter of 2012, he said. White predicts revenue growth of 10% year over year.
White believes Netflix will lose 200,000 subscribers in the U.S. and Canada, where it recently raised prices. Those losses will be offset by outsize gains throughout the Asia Pacific region, he said. Netflix also will lose about 1 million subscribers in Russia after suspending service there in response to the country’s invasion of Ukraine, analysts say.
Earlier this week, three Wall Street firms cut their price targets on Netflix stock.
BMO Capital Markets maintained its outperform rating on Netflix stock but trimmed its price target to 640 from 650. Cowen kept an outperform rating but lowered its price target to 590 from 600. And Truist Securities reiterated its hold rating and slashed its price target to 409 from 470.
On the stock market today, Netflix stock rose 1.8% to close at 350.43. Netflix stock is down 50% since hitting a record high of 700.99 on Nov. 17.
Subscriber growth has taken a back seat to profitability, BMO analyst Daniel Salmon said in a note Tuesday.
“Subscriber growth still matters, but the market is bringing far greater scrutiny of the path to profitability for more recent streaming entrants,” Salmon said. Those entrants include Walt Disney‘s (DIS) Disney+, Paramount Global‘s (PARA) Paramount+ and Warner Bros. Discovery‘s (WBD) HBO Max. For Netflix, the critical metric is free cash flow, which is now positive, he said.
The new entrants are pressuring Netflix’s growth as they ramp up spending on content and marketing.
“We believe investors maintain confidence in Netflix as a streaming leader, though no longer view the company as the streaming leader,” Guggenheim analyst Michael Morris said in a note Monday. He rates Netflix stock as buy with a price target of 555.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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