March 26, 2023


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Netflix looks more attractive as stocks fall: Analyst

Netflix looks more attractive as stocks fall: Analyst

Netflix (NFLX) is being beaten up on Wall Street. Shares of the broadcasting giant are down 52% since hitting record highs in November 2021. So far, 2022 hasn’t helped the recession, with shares dropping a whopping 45% year-to-date.

“The concern is the growth outlook,” Dave Heeger, chief equity analyst at Edward Jones, told Yahoo Finance Live, citing the company’s disappointing outlook as a catalyst for the selloff.

In its latest earnings report, Netflix said it expects to add 7 million paid members in the current quarter, less than the 7.82 million consensus analysts had expected. That’s a 27% decrease from the 9.6 million subscribers Netflix added in the quarter last year, which was the highest level ever for net paid additions quarterly.

However, Heger suggested that it might be a good time for investors to buy the dip.

“The valuation now looks more attractive than what we saw last year,” the analyst explained. He added that current market levels provide a “good opportunity to buy shares.”

“There’s certainly been some question about what the long-term growth outlook for Netflix is, and those expectations have fallen off a little bit, [but Netflix remains] And it’s a company where we continue to see an opportunity “for worldwide subscriber growth,” he continued.

Heeger went on to acknowledge the streaming giant’s expanding presence in international markets, as well as its ability to raise prices to consider the “increasing content and increased value of its services” as bullish potential for further market penetration and success.

“The evaluation now looks more attractive than what we saw last year…”Dave Heeger, Chief Equity Analyst at Edward Jones at Netflix

The platform has also pursued mergers and acquisitions in order to compete in the crowded media landscape. Compared to its streaming counterparts, Heger noted that Netflix “has been somewhat more active on the M&A front.”

“Recently, the company appears to be interested in adding content within the gaming space, and they have been talking a lot about raising their profile in online gaming. This is a new way to add value for Netflix subscribers and may help justify price increases that have been achieved over time.”

Netflix tends to mergers and acquisitions as live streaming competition intensifies

In general, more companies are experimenting with price increases to combat the headwinds of inflation.

Despite fears of an imminent recession, Heger predicted that Netflix would have the ability to weather any economic storm, as consumers generally cut home entertainment first.

He concluded, “Historically at least, we’ve seen in the world of traditional pay-TV that subscribers tend to stick to home entertainment…even during the most difficult times.”

Alexandra is the Senior Entertainment and Food Correspondent at Yahoo Finance. Follow her on Twitter aliecanal8193

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