By Senad Karaahmetovic
Benchmark analyst Matthew Harrigan downgraded shares of Netflix (NASDAQ:NFLX) to Sell with a price target of $157.00 per 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). An issue is moderating growth even as 2023E free cash flow yield (optimistically) is in the 3% vicinity, with FCF yield a more germane metric than P/E as 2023 cash programming spend may still exceed amortizations by $3B+ in our estimation. 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.
The analyst could see shares plunge to $132.00 if the 14x P/E is achieved.
Netflix shares are down 1.1% today to trade at $167.81.