Buying a Netflix stake could be a dead investment, according to the famous analyst. Netflix’s January 2022 earnings report did not reassure.
An analyst who tracks Netflix’s shares warned after a disappointing earnings report: Streaming giant Netflix may need to think twice before jumping on the stock market to buy its shares.
In the first quarter of 2022 and in the seasonally weak second quarter, Netflix’s stock could be a “dead investment,” Jeff Wlodarczaksaid , adding that Netflix still needs to prove it is experiencing significant growth. According to Wlodarczak, new investors seem as thoughtful as Netflix shareholders.
Netflix earnings report beats investor expectations
Netflix’s shares fell as much as 21% to $408 in pre-market trading. The company’s fourth-quarter earnings were under pressure from slowing subscriber growth and operating profit margin. The online streaming giant cited increased competition (rivals such as Disney+, HBO Max, Apple TV+ and new decisions in the US dollar) as reasons for the decline in revenue.
Netflix gained 8.28 million global paid net subscribers in the last quarter of 2021, beating the 8.13 estimated by analysts, according to Bloomberg data, but still doesn’t offer a very inspiring picture for the future. The company said it expects to gain 2.5 million subscribers in the first quarter, compared with 3.98 million subscribers in the first quarter of last year.
Morgan Stanley, KeyBank and Barclays also announced they were downgrading Netflix shares. But analyst Wlodarczak of Pivotal remains hopeful of Netflix shares in the long run, although he thinks the stock will not be reliable in the near term.
“Ultimately, we think the Netflix system is still running. It is operating at a slower pace, given the enormous increase in demand provided only by pandemic closures, but over time we expect normalization in subscriber results and stock,” he said. Netflix also lowered its stock price target from $750 to $550, he said.