By
Mayowa Adebajo
February 13th, 2024
According to Jefferies, Netflix stock is now rating as hold, not buy. Besides, the company set a new price target for $415.00 expecting Netflix shares to rise by up to 7.19% within the next 12 months.
On Monday, shares of the US media-services giant Netflix Inc (NASDAQ: NFLX) closed 2.60% down at $387.15 dropping by another 1.46% in pre-market. Such a weak performance followed the updated downgrade rating for Netflix stock provided by Andrew Uerkwitz, an analyst from Jefferies, a diversified financial services company.
According to Jefferies, Netflix stock is now rating as hold, not buy. Besides, the company set a new price target for $415.00 expecting Netflix shares to rise by up to 7.19% within the next 12 months.
Andrew Uerkwitz stated:
“We are confident in being in the middle innings of streaming penetration, but now see it taking much longer adding uncertainty. On the adjacency front, we believe Netflix isn’t moving fast enough.”
He further added:
“With low churn, unique scale advantages, and strong library of content, Netflix is in a position to significantly increase free cash flow with minimal sub adds via pricing, smaller/stable content budgets, and potentially leveraging catalog.”
Notably, as Jefferies stated, Netflix stock downgrade does not mean it will not get back to buy rating. According to Uerkwitz, he believes there is a path for Netflix to go back to a buy. However, the analyst thinks it will not happen soon given the near-term uncertainty.
Year-to-date, Netflix stock is 35.74% down. Currently, it is making new 52-week lows, trading almost twice lower in comparison to $700.99 it was trading before. Netflix’s market cap totals $176.07 billion.
Potential Business Field for Netflix
In addition to downgrading Netflix stock, Jefferies also said that the company may need to change its focus to video games. According to Jefferies, the shift would help the streamer boost its growth.
Notably, a booster would come in handy for Netflix as lately, there have been concerns regarding the future of the company as the competition in the industry is really tough. Recently, Netflix announced its Q4 earnings, they were quite impressive in terms of financial achievements, but the subscription growth has been quite low in comparison to previous quarters. Netflix recorded an additional 8.28 million global paid net subscribers in 2021 Q4, crossing analysts’ expectations of $8.19 million. However, back in 2020 Q4, the company added 8.5 million subscribers, just as it predicted.
“In many ways, Netflix’s numbers this quarter have us worried about the streaming industry as a whole. The sell-off in Netflix stock has made it difficult to continue to be a bull market indicator for the media sector,” said MoffettNathanson analyst Michael Nathanson.
Notably, Netflix co-founder Reed Hastings also sees prospects in the gaming industry for Netflix. Therefore, we might expect to see a shift in the company’s activity.