Benchmark Downgrades Netflix to Sell, Says Shares Could Drop Another 20% -Breaking
By Senad Karaahmetovic
Matthew Harrigan, Benchmark Analyst, downgraded Netflix shares (NASDAQ:) and recommended that they be sold with a target price of $157.00 each share.
The analyst notes headwinds from “continued U.S. dollar strength” that are likely not reflected in the guidance.
“We are skeptical on any sustained Netflix stock recovery even as bulls are (or were) talking up its 14.1x forward P/E off 2023 consensus estimates (15.4x per Benchmark). The issue with moderating growth is that 2023E’s free cash flow yield is optimistically in the 3% range. FCF yield is a better metric than PE as we believe 2023 cash programming spending may exceed amortizations by at least $3B+. Beyond the inflation challenged and more price sensitive consumer, the continued negative Netflix press glut, relating to member losses and even Prince Harry and Meghan, is a mild growth albatross,” Harrigan told clients in a note.
Investors are “very jaded” on streaming valuations as Netflix shares could take another hit “if member growth and operating profit margin stall out in tandem.”
“Restraining cash programming spend may be difficult in the mature but increasingly competitive U.S. market, even as growth investments are necessary in Asia and other markets. New member activity in LatAm and the U.S. Hispanic market could be dampened by macro conditions and largely AVOD competition from TelevisaUnivision’s Vix service, featuring sports and news as well as scripted shows,” the analyst added.
If the analyst is successful in achieving the 14x P/E, shares could plummet to $132.00
Netflix shares today are trading at $167.81, down 1.1%