Analysts Give Netflix 'Hold' Rating On Recovery Hopes

Analysts Give Netflix Hold Rating On Recovery Hopes

Netflix (NASDAQ: NFLX) stock value is down about 7 percent this week, on par with a stifled market whose recovery continues to struggle from two years of low activity. Fans of the subscription-based streaming media platform may not believe that the former stock market powerhouse has lost approximately 75 percent of its value from its peak when it was more than $701 per share.

Netflix Shares Take A Dive

Recently bottoming out at a five-year low, the former FAANG growth stock is currently trading at a value nearly 17 times lower than earnings. That means not only is the stock extremely undervalued, but it could point to a coming value trap. After two consecutive quarters of weakness, the trend appears to be persistent, and with news of more subscription cancellations on the horizon, this could be the beginning of major losses for the online streaming giant.

Indeed, Netflix shares have not been able to reach the highs achieved by the brand in 2021, at the height of the pandemic. Of late, the stock has held position at or near a 52-week low of $162.71 per share. In the middle of May, the streaming giant found a little pop and closed at approximately $186.

For perspective, the 52-week high is $700.99.

Analysts Advise Hold Rating on Netflix Stock

This may be why nearly three dozen analysts offering a 12-month price forecast, the recent 3-month median price target is $300.00 with a low and high estimates of $220 and $635, respectively. This newly established median represents an increase of roughly +55 percent from its most recent price analysis of 191.72

This in mind, the current poll of 44 analysts advise a hold rating on Netflix, inc. This rating remains unchanged from the same hold rating for the past few months. About 11 of these analysts have advised a buy rating while only 3 advise to sell. This means that despite Netflix's current downward trend, there may be some hope yet that the service will rebound.

In the current quarter, EPS is $3.00 on sales of $8.1B. Indeed, the California-based company appears to have outperformed analyst ratings for the first quarter of 2022, but not by much.

Earnings per share for the first quarter of 2022 was +110.12 percent, which rang in just below that of the Q2 from 2021, when it was +112.14 percent. While the numbers may not have matched that of the Q2 2021, it is a surprisingly big jump from the decline that began in Q3, when EPS was only up +9.21 percent. And it is especially good news from the negative earnings at the close of 2021. Still, the recovery is not complete as quarterly growth remains down -15.04 percent, and annual growth is down 2.74 percent.

Cancellations Galore

It is no big secret that immense customer dissatisfaction has led to this great Netflix exodus of 2022. Between popular show cancellations, unfair price increases, and a proposed ban on sharing accounts, users remain unhappy with the service for an abundance of reasons. These complaints—and more—have contributed to the loss of 200,000 subscribers in the first quarter of 2022, alone. And with more SVOD (Streaming Video On Demand) services coming into the fray, competition in this market is fierce.

Unfortunately, analysts anticipate another two million could flee this vast ocean for more promising shores by the end of the second quarter. This is the first time Netflix has posted subscriber losses in more than 10 years.

Can Outlook Improve?

But even as many users might argue that Netflix has lost its initial charm, many analysts remain somewhat bullish on the service for a couple reasons. First of all, while the multiple is uniquely low, Netflix is still the leader in its market. Secondly, Netflix is on track to launch its streaming video game service that will simply add a catalog of about 50 on-demand games at no extra charge. This could be a real game-changer for Netflix, and it could not have come at a better time.

Still, many questions if Netflix's catalog of games can hold up against the likes of proven gaming stalwarts like Microsoft's Xbox Game Pass and the presently-evolving Playstation Plus (et al) services. After all, Netflix's catalog will, more than likely, feature mostly mobile type games: not necessarily the kind of bonus content that will appease subscribers who are paying to watch movies at home.

Companies in This Article:

CompanyCurrent PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Netflix (NFLX)$178.97-0.5%N/A16.12Hold$341.16

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