Goldman downgrades Netflix to sell
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Goldman Sachs stated that it is time to sell Netflix due to the impending recession and growing competition. “We downgrade NFLX to Sell (from prior Neutral rating) as we have concerns around the impact of a consumer recession as well as heightened levels of competition on demand trends (both in the form of gross adds and churn), margin expansion, & levels of content spend and view NFLX as a show-me story with a light catalyst path in the next 6-12 months,” wrote analyst Eric Sheridan in a note to client Thursday. Netflix shares have fallen by 68% in the past year, and over 72% since its peak. After reporting in April that it had lost subscribers for the first-time in over 10 years, Netflix’s stock has suffered a significant decline in recent months. According to Thursday’s closing, the firm has lowered its stock price target from $265 to $186 per shares. This translates into a downside of 3.5%. Goldman also decreased its 2022- and 2023 revenue estimates, as well as paid streaming subscriptions. Due to the bank’s efforts in cracking down on password sharing, and its plans for an advertising-supported tier, the average U.S. revenue per user will be higher by 2024. The bank could see a positive outlook for Netflix despite a bearish stock price. However, the bank may be able to move quickly on these initiatives as well as recover subscriber growth. Sheridan stated that Netflix might see better gross adds, as well as better retention rates in foreign markets, if other streaming platforms slow down global expansion. “This could result in subscriber results higher than our current expectations.” Goldman also downgraded Roblox, noting that it could see slower growth in post-pandemic markets, even though Roblox’s long-term gaming potential. — CNBC’s Michael Bloom contributed reporting
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