As the streaming giant embraces advertising and stabilizes its content spend at $17 billion annually, financial observers' reactions range from relief at beating low expectations to an outlier call to sell the company entirely.
Olivia Colman, Luke Evans, Jessie Buckley, Johnny Flynn Join Voice Cast of Netflix's 'Scrooge: A Christmas Carol' Animation
Credit Suisse analyst Douglas Mitchelson broke that mold. While he maintained his “neutral” rating on Netflix, he cut his price target from $360 to $263 “due to a more conservative long-term forecast.” “Uncertainty remains elevated for Netflix with subscriber growth stalled post-pandemic and focusing on improving monetization via charging for password sharing and broadening the service’s value proposition through lower-priced ad tiers,” he explained.
“Content is always the heart of the stock,” he highlighted in digging deeper into the streamer’s user trends, as well as content spending and strategy. “We think Netflix scaling its content spend so quickly and widely, with impressive velocity in deliveries globally, may have meant that the quality suffered. From here, the company is notably looking to improve efficiency and efficacy.
Others joined him in addressing the theme of investor sentiment. “The market compressed Netflix’s multiple last quarter in part because its strategy evolution seemed rushed,” wrote BMO Capital Markets analyst Daniel Salmon. “This quarter, management delivered a much better explanation of its new points of focus, including advertising and password sharing/’add a home.’ But first and foremost, both second-quarter actual and third-quarter guidance for subs/members were good enough.
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