Netflix Stock Forecast: Netflix rises on Tuesday

Netflix Stock Forecast: Netflix rises on Tuesday
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Netflix Stock Forecast: Short term recommendation is to Sell

Netflix Stock Forecast: Latest Price

Metric
Value
Trend
Share Volume
12.2 M
Lower
Average Share Volume
11.4 M
Higher
Forward PE (1 Year)
18.37
N/A

Netflix Stock Forecast: Momentum Summary

Metric
Trend
Price
Higher
Share Volume
Higher
Technical Indicator
Sell

Netflix Stock Forecast Performance Chart

Stock Name
1 Month
6 Months
1 Year
-46.3%
-68.4%
-58.8%

Netflix Stock Forecast: Technical Analysis

Source
Support
Resistance
Recommendation
$186 (S3)
$204 (R1)
Buy
$182 (S3)
$209 (R1)
Sell

Netflix Stock Forecast: Latest Tweets

Netflix Stock Forecast: CrowdWisdom360-Insights

  • Another feature being developed by the company will allow members of the basic, standard, or premium subscriptions to move their profile information to a new account. Before implementing the modifications in other regions of the world, the company is now testing the features in Chile, Costa Rica, and Peru.
  • Recently, Netflix increased the fee of its regular plan in the United States and Canada from $13.99 to $15.49. on the other hand, Netflix simultaneously slashed subscription fees across all plans in India in order to gain more subscribers 
  • Netflix has lost licence agreements with Disney as a result of increased competition and slow growth rate of subscribers.
  • During the pandemic, Netflix stock surged, as lockdowns, quarantines, and restrictions forced people to spend more time at home. The stocks now lost all of its gains from the pandemic.
  • Revenue increased by 16% year on year to $7.7 billion, with subscribers increasing by 9% to 222 million globally. revenue and subscriptions growth is in good numbers exactly what investors expected.
  • The company’s and its stock price’s performance over the last few years has been volatile. Stock price is trading at low prices since a decade. However, Analysts belive Netflix has a profitable business model and it has potential to go up in the near future. Also it is better to buy a stock when it is cheap.
  • Netflix has been at 6 months low at -36%, which is a good price to buy given recent developments and company potential.
  • Netflix will be releasing their Q1 results by next week. According to Wall Street Forecast, Netflix will have earning of $2.95 a share on sales of $7.94 billion. Meanwhile, after withdrawing their streaming services in Russia, Netflix has faced a backlash from Russian users, the latter sued the company for the same.
  • Netflix has recently lost a high number of subscribers. Suspension of services in Russia and inflation might be the key causes of that.
  • As of now, Netflix seems out of favor, analysts predict the Q1 earnings to be one of the slowest ones.
  • The short-term recommendation is to Sell this stock.

Netflix Stock Forecast: Bull Case of Netflix Stock

  • Citi upgraded the Rating-Citi analyst Jason Bazinet upgraded the rating of the stock to buy from neutral (hold). However, he has reduced the target price from $595 to $450. The analyst said the market reaction is over the top and 20 percent correction in a single day post Q4 results is not justified. Edward Jones analyst David Heger also upgraded Netflix from neutral to buy.
  • CEO Reed Hastings buys shares –  The recent dip post Q4 earnings was used by CEO Reed Hastings to buy 50,000 shares worth $20 million. His total holdings now stand at 5.16 million shares. CEO purchasing shares creates positive sentiments in the market. It creates belief in the retail people that company should outperform in the near term, motivating CEO to load up shares in his portfolio.
  • Strong content in the pipeline – Netflix has produced some amazing content over past few months which includes worldwide popular series like Squid Game and Money Heist. Netflix was the leader in Emmy and Oscar nominations. With pandemic hitting the production across the globe, Netflix is expected to come with more user engaging series and movies, more importantly home produced to keep the interest at high pitch.
  • Price Increase in US and Canada – Recently, six days before Q4 results, Netflix announced nearly 11 percent price hike for US and Canada region. Netflix was price hike was in last year October and it was sixth increase in last eight years. While many analysts see it in negative perspective, it will help Netflix to increase the profit margin in the near term. Also Netflix witnessed slower growth in these regions and it is not a bad idea to extract maximum out of current subscriber base.
  • Entering in new Avenues- While it is true that online streaming has been forte for Netflix, but it is flexing its muscles in other fields also lately. Online merchandise store was opened in June and in November, it launched mobile games. By end of 2021, it had 10 different games based on its property. Going forward, in 2022, it is expected to expand and add to the profitability.

Netflix Stock Forecast: Bear Case of Netflix Stock

  • Increased Competition – For a long time, Netflix was the only option and it got head start in comparison to other streaming services. But now the game is changing and there are many to take a bite out of Netflix’s lunch. Amazon Prime Video, Walt Disney’s Disney+ and AT&T’s HBO Max are all lined up to give stiff competition to Netflix, and that explains the main reason for slower growth in subscriber base in recent time.
  • Saturation in US and Canada – Market for Netflix is at near saturation for Netflix in US and Canada. It just added 1.3 million subscribers in the region in entire past year. And that explains the decision for price increase in the region. But this seldom price increase is become more frequent and it can alienate more price sensitive customers. Market could not digest slower growth rate in Q4 2021, price hike can lead to flat line in subscriber growth in near term. Netflix global paid subscriber count is tabulated below:
Quarter
Subscribers
Growth (YOY)
Q4 2017
110.64 million
24.2 %
Q4 2018
139.26 million
25.9%
Q4 2019
167.09 million
20%
Q4 2020
203.66 million
21.9%
Q4 2021
221.84 million
8.9%
  Source: Netflix Quarterly fillings, YOY= Year Over Year

There is an obvious decline in the growth rate of subscribers and going forward, it could be a headwind for Netflix.

  • Content cost remains high – Netflix spends lot of money to produce its content. Also, it spends money upfront to create content and then recognizes its value over time, which then adds to its bottom line. Simply putting, Netflix spends more money on content than it reports in the income statement and earnings per share and every content produced is expensed over the years to come ranging between 6 months to 10 years.
  • Negative Free Cash Flow – The accounting system discussed in the last point makes it look like Netflix is profitable in every quarter, but it has always reported negative free cash flows. For example, Netflix reported $607 million as net income in Q4 2021, but its free cash flow was negative $569 million. So even if Netflix is one of the largest company in the world, it does not have any cash left after investing in its own company and such flaws are more looked upon after a rough quarter.

Netflix Stock Forecast: Is it Another Blab and Grab Case?

There is no doubt that Netflix is a quality stock that has outperformed the index in the last decade. The recent quarter results are good and it has met market expectations, it is only the weak guidance, that has spooked the market sentiments. There are various probable reasons for weak guidance like COVID hangover still jeopardizing the production, as told by management.

But recent dip used by CEO to load up shares in his portfolio raises more eyebrows. It points towards as if weak guidance was used as a means to create negative sentiments to bring down stock so that CEO Reed Hastings can fill up his own pockets. Obviously, at a peak of $691 in November, Netflix was more expensive to own.

Nevertheless, Netflix is a company with strong fundamentals and it is likely to perform better in the near term. Also, new avenues like mobile gaming will be keenly watched for their contribution in profitability. Overall Netflix did not deserve 20% haircut post results and it should be a black swan event to be kept aside.

Netflix stock forecast

-Vineet Agarwal

Note: Crowdwisdom360 collates Predictions and data from all over the net and has no in-house view on the likely trends in the Stocks or Crypto Coins. Please consult a registered investment advisor to guide you on your financial decisions.

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