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Netflix's Price Target Cut at Stifel Despite 'More Attractive' Risk-Reward

Published 06/21/2022, 10:55 AM
Updated 06/21/2022, 03:05 PM
© Reuters.  Netflix's (NFLX) Price Target Cut at Stifel Despite 'More Attractive' Risk-Reward

By Sam Boughedda

Stifel analyst Scott Devitt cut Netflix's (NASDAQ:NFLX) price target to $240 from $300 in a note Tuesday, maintaining their current Hold rating on the stock.

However, despite cutting the price target, Devitt provided positive commentary, stating that “at ~16x 2023 P/E, we believe the risk/reward has become more attractive as current valuation implies minimal incremental subscriber growth, in our view.”

“At the current share price, we believe the market may be overlooking the multi-year opportunity for a return to sustainable subscriber growth, with optionality stemming from the company’s upcoming advertising-supported and password-sharing plans,” wrote Devitt.

However, he added that the streaming subscription service needs to address its affordability issue.

“In recent quarters, management has attributed slowing subscriber growth to a variety of headwinds, including competitive pressures, macro conditions, and the prevalence of password sharing, which has made it difficult to grow subscribers in relatively mature markets. While these factors are certainly impacting Netflix’s subscriber acquisition, we believe the recent discussion around sub growth has overlooked another longstanding (and arguably more prevalent) issue for Netflix: affordability. After taking a country-level approach to our analysis, it’s clear that affordability is a barrier to subscriber growth outside of developed markets,” said the analyst.

“We maintain our Hold rating as we await further details related to these initiatives, though our preliminary work suggests that advertising can be a catalyst for renewed subscriber growth while having a neutral to positive impact on revenue per member.”

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