Q1 bomb triggers Wall Street downgrades

  • Netflix plunged 28% on Wednesday after its first-quarter earnings revealed a loss of subscribers.
  • The streaming company also predicted a further drop in subscribers in its second quarter.
  • See how three Wall Street analysts reacted to the bombshell in Netflix’s first quarter earnings.

Netflix shares fell 28% on Wednesday after the


streaming

The company announced mixed first-quarter results that revealed its first subscriber loss in a decade.

On Tuesday, the company said it lost 200,000 subscribers on a net basis, which is a far cry from management’s guidance of 2.5 million net subscriber additions. AND


Netflix

expects the pain to continue in the second quarter, having predicted a drop of 2 million subscribers.

“Our relatively high domestic penetration – including the large number of households that share accounts – combined with competition is creating headwinds in revenue growth,” Netflix said in its letter to shareholders.

The company said it plans to better monetize the roughly 100 million households that are sharing passwords to use the service and that it will explore a lower price tier with ads to give more customers options for how to subscribe to and view Netflix content.

But those two potential growth levers are likely a year or two apart, and Wall Street analysts hit stocks with a series of downgrades on Wednesday.

See how three Wall Street analysts reacted to Netflix’s first-quarter drop in subscribers.

JPMorgan: “A quarter of sea change for Netflix.”

“The company essentially caved to all the key points of the bear thesis… short-term visibility is limited, our 2022 net additions are down sharply from 16 million to 8 million, and there’s not much to look forward to in the future.” next few months in addition to the new, much lower share price.”

JPMorgan downgraded the stock to neutral overweight and lowered its price target to $300 from $605.

Goldman Sachs: “We see Netflix as a multi-year story to show me.”

“It’s not additive to downgrade stock at current levels as Netflix is ​​now trading closer to a lower-growth traditional media content/distribution business than a high-growth disruptive technology company. Generation, we see Netflix as a multi-year history with a catalyst most likely outside the next 6-12 months.”

Goldman Sachs reiterated its neutral rating and lowered its price target to $265 from $420.

Stifel: “All good growth stories come to an end.”

“While some headwinds highlighted by management (weaker macro, inflation) are expected to be transitory, the company will still need to address a number of more secular issues that are likely to weigh on growth, including increased competition, potential maturity in key markets, and the prevalence of data-sharing. passwords. Netflix has several levers to possibly reinvigorate growth, including introducing an ad-supported subscription plan and improving monetization of shared accounts; however, we note that both offerings are in their early stages of development and it is unlikely to materialize in the results until the second half :23/2024.”

Stifel downgraded the stock to keep buying and lowered its price target to $300 from $460.

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