Netflix slips as Wall Street weighs in on mixed Q1 results

Netflix (NASDAQ:NFLX) shares slipped more than 1.5% in premarket trading on Wednesday after the streaming giant reported a mixed first-quarter and offered tepid guidance, leading to a varied reaction from Wall Street.


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UBS analyst John Hodulik, who upgraded Netflix (NFLX) to buy from neutral after the results, said the company is likely to see “sustained double-digit profit growth” and a sharp increase in free cash flow, as the competition focuses more on profits, potentially helping Netflix. 

“We believe this will drive upside to subs/pricing power in the coming yrs while also keeping a lid on content costs, one of the biggest swing factors for profits/FCF (spend now expected to decline in ’23),” Hodulik wrote in an investor note.

Hodulik added that new revenue-driving initiatives – including paid-sharing and the advertising-supported tier – show the company’s “performance is inflecting,” as revenue and margins are both poised to expand, while content spending stays “relatively stable.”

The analyst also said he expects Netflix (NFLX) to see a subscriber boost in the second-half of the year to more than 12M, due in part to paid-sharing and the lower priced ad tier.

On the other hand, Goldman Sachs analyst Eric Sheridan reiterated his sell rating after the results, noting that while paid-sharing and the ad tier could help bring in more subscribers and boost margins over the long-term, the stock is expensive at current levels. 

“…[W]ith the stock up 39% in the last 6 months (vs. the S&P 500 +12%), we see a lot of the forward operating momentum already priced into Netflix shares which now trade at an EV/FCF (ex-SBC) of 42x on our 2023 estimates,” Sheridan wrote in an investor note.

Citi analyst Jason Bazinet, who has a buy rating and per-share price target of $400 on Netflix (NFLX), said the weak guidance is likely to impact the stock in the near-term. 

“Given the weaker-than-anticipated [second-quarter] outlook, we would not be surprised to see shares trade a tad lower…,” Bazinet wrote.

On the earnings call, Netflix (NFLX) said its password sharing initiative was set to go global and that it would increase the pace of its stock buybacks over the year.

Analysts are largely cautious on Netflix (NFLX). It has a HOLD rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha’s quant system, which consistently beats the market, rates NFLX a HOLD.

Now read: Netflix exiting disc-mailing business after 25 years

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