JPMorgan) analyst Doug Anmuth reflected on the recent weakness seen in Netflix (NASDAQ:NFLX) stock.
Netflix trades over 70% lower YTD and roughly 75% from the record high. Anmuth reminds investors that “this is a 20% GAAP operating margin business that should still have positive FCF this year.”
Analysts are currently looking for $772 million in FCF for 2022, much higher than JPMorgan’s estimate of $500 million.
“We’ve seen NFLX go through tough times in the past—2007/2008 w/Blockbuster & 2011/2012 post Qwikster—among others. We’d never count them out,” Anmuth told clients in a note.
In the meantime, he shared 3 major concerns about Netflix that are coming up in conversations with investors.
- Lack of clarity on timing & the range of outcomes around account sharing efforts & advertising;
- Lack of visibility on 2H22 subscribers & limited catalysts near term;
- Many still don’t understand how NFLX flipped from interpreting recent soft subscriber numbers as pandemic hangover to a function of competition & higher penetration due to account sharing.
Anmuth especially paid close attention to the first subject.
“We believe an ad-supported tier is somewhat more complicated as NFLX does not have advertising in its DNA. But it does have several hundred million viewers, & the average member HH still likely spends 2+ hours/day on the platform. NFLX can partner with 3rd-parties while also building out a 1st-party sales team for bigger brand marketers. What's less understood is how many existing subscribers across Basic/Standard/Premium would trade down to an ad-supported tier,” the analyst added.
By Senad Karaahmetovic