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Netflix stock: Buy, Sell, or Hold? Wall Street split up on future of streaming giant

Netflix (NFLX) stock has plummeted more than 70% year-to-date amid a broader market sell-off that'due south slammed growth stocks and fueled talk of a potential recession.

So should investors purchase the dip? Wall Street analysts are a flake mixed on that question.

Netflix shares rose more than 7% on Wednesday afterwards Cowen analyst John Blackledge reiterated his Outperform rating on the stock and noted a "significant, multi-yr revenue opportunity" when it comes to the company's imminent advert-supported tier.

The bears are also out in force: On Tuesday, Criterion annotator Matthew Harrigan reverted back to a Sell rating on the stock and issued a new price target of $157 a share. The analyst admitted to "prematurely" upgrading the stock to Hold following the company's Q4 earnings report.

On Fri, Goldman Sachs (GS) analyst Eric Sheridan downgraded shares to Sell from Neutral. Sheridan slashed his price target to $186 (down from $265), citing "concerns around the bear on of a consumer recession equally well every bit heightened levels of competition on demand trends."

Santosh Rao, head of research at Manhattan Venture Partners, told Yahoo Finance that "the worst is priced in" and advised investors to be patient and focus on the next several quarters.

"It's going to have some time for people to realize that, at the end of the day, this is simply a solid visitor with astonishing resources to rebuild," he said, explaining that the platform's upcoming ad-supported offering and crackdown on countersign sharing should help "expand its revenue source."

Rao added that Netflix, which recently green-lit a 2d season of "Squid Game," has a "slate of winning programs" and emphasized that investors should prefer a purchase-and-hold arroyo.

"There's a lot of piece of work in progress [simply] information technology's a good investment — a solid company that's still cashflow positive with the prepare-up and infrastructure to come up back," Rao said. "Information technology's [Netflix's] lead to lose."

Netflix's 'Squid Game' (Courtesy: Netflix)

Rao reiterated that the subscription-based streaming model is here to stay, though he did note that various macroeconomic factors similar the electric current competitive landscape are much different today.

"All of that limits the upside," he said. "But if Netflix tin incrementally show some improvements, I remember they volition get the do good of the incertitude at this signal."

Rao stressed that the streaming platform's biggest claiming volition be "putting all of the pieces in place" and appropriately managing expectations.

"In that location's going to be some discipline involved — yous can't merely throw out money and get content," the analyst stated, adding that content "has to be optimized, and it has to be expert. That's easier said than done. Only Netflix has washed it in the past. I'm sure information technology will practice it once more."

Netflix 'hit that wall really fast'

Netflix shares have been under force per unit area since the company announced an unexpected beginning-quarter subscriber loss and weak second-quarter guidance in April. The company shed 200,000 paying subscribers in the kickoff quarter and said it expects to lose another 2 million in the current quarter.

The collapse in internet subscriber additions seems to accept surprised even Netflix, especially after the platform enjoyed an intense pull-forrad effect during the pandemic that brought in 37 million subscribers in 2020.

Netflix "seemed completely caught off guard" by the sudden drop in users, Nat Schindler, Bank of America senior analyst, told Yahoo Finance, adding that the platform "hit that wall really fast at a really loftier rate of speed, and but suddenly stopped growing."

He explained that due to the abrupt shift information technology will be very hard for the platform to "switch its mindset" and transition from a high-growth company to a profit-maximizing ane.

"Can Netflix rejigger its business organization to be profitable and very cashflow positive? That remains to be seen," Schindler continued, adding that it would be difficult to predict the impact on Netflix'due south lesser line if the company was to drastically cutting its $eighteen billion almanac content spend.

Still, Schindler (who has an Underperform rating on the stock) said investors desire to meet the platform "rationalize its expense levels to go generators based on a new normal of growth."

Rao, meanwhile, argued that it's more about the "stickiness" of the subscriber rather than the bodily number.

"In that location'south a lot more than to making money than just adding subscribers everywhere," Rao said, warning investors against a "short-sighted" focus on just growth.

Alexandra is a Senior Amusement and Nutrient Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at alexandra.canal@yahoofinance.com

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Source: https://finance.yahoo.com/news/netflix-buy-sell-hold-wall-street-split-streaming-190929390.html

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