'We sense low conviction across the Street, so this is another wait and see quarter, with investors likely resetting afterwards,' says Wells Fargo's Steven Cahall.
Addressing rising inflation and talk of a recession in more detail, Swinburne predicted both could hit Netflix. “Streaming video revenues may prove more vulnerable than expected to a global recession and lower consumer spending levels,” he argued. “While Netflix’s leading engagement should help it retain customers, its relative price premium is likely an offset as consumers look to trim their streaming bill.
Wells Fargo analyst Steven Cahall, in a July 13 report, noted that his team’s analysis of monthly active users data implies a second-quarter net subscriber drop of only 1 million. But he stuck to his 2 million decline forecast, in line with management guidance. “The main driver of our unchanged estimates is low conviction, as we think the historically correlated metrics are less relevant at present for Netflix, which appears to be experiencing a new phase of customer churn,” he explained.
Bank of America analyst Nat Schindler, in a June 23 report, reiterated his “underperform” rating on Netflix, but cut his price target from $240 to $196 “given current market conditions, rising costs of content production, in addition to several potential costly initiatives.
Near-term, it remains all about sub trends after all. Cowen analyst John Blackledge highlighted as much in his earnings preview, which had this takeaway: “Net-net, we expect investors will remain focused on net sub trajectory at the , as well as third-quarter guide.” He forecasts a paid net decline of 2 million users, “given macro, competition and password sharing.” But he slightly raised his 2023 net adds projection due to the upcoming ad tier.
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