Nasdaq NFLX NetFlix

California-based Netflix, Inc. (NASDAQ: NFLX) offers a subscription-based streaming service through which its members can watch TV shows, documentaries and movies on any device connected to the Internet. The video library features the company’s own productions as well as videos from distribution deals.

At the end of last year, Netflix had over 221.8 million subscribers across the world, including 75.2 million in the U.S. and Canada, 74 million in Europe, the Middle East and Africa, 39.9 million in Latin America, and 32.7 million in Asia-Pacific.

The video streaming giant’s services are not available in Mainland China, Syria, North Korea, Kosovo, Russia and Crimea.

Recent Developments

Recently, Netflix added a 'Two Thumbs Up' button to allow users to rate what they are watching. This option will help the company make better recommendations for the content that users may want to watch in the future.

In a blog, Netflix said, “A Thumbs Up still lets us know what you liked, so we use this response to make similar recommendations. But a Double Thumbs Up tells us what you loved and helps us get even more specific with your recommendations.”

The 'Two Thumbs Up' button is there along with the Thumbs Up and Thumbs Down options.

Meanwhile, the company is scheduled to release its first-quarter results on April 19. Monness analyst Brian White offers some insights into what to expect.

Q1 Expectations

White expects the company to post revenue and earnings of $7.903 billion and $2.88 per share, respectively, against the Street’s estimate of $7.933 billion and $2.90 per share.

Netflix anticipates first-quarter revenue of $7.903 billion, operating income of $1.765 billion, and EPS of $2.86.

Further, the analyst expects the company’s paid global streaming net additions of 2.5 million to 224.4 million, up 8% year-over-year. This equates to global streaming revenue of $7.86 billion, White said. The net additions expectation is same as the Netflix’s guidance.

On the basis of region, White expects paid global streaming net additions of negative 200,000 in the U.S. and Canada to 75 million; 1.1 million in Europe, the Middle East & Africa to 75.2 million; and 1.6 million to total 34.3 million in the Asia Pacific region. Further, he expects the same to remain flat at 40 million in Latin America.

Guidance

The analyst expects Netflix to report sales and EPS of $8.184 billion and $2.85, respectively, in the second quarter of 2022, lower than the Street’s estimate of $8.212 billion and $3.01 per share.

For full-year 2022, White anticipates revenue to total $33.193 billion, EPS of $11.32, operating margin of 20.4%, and free cash flow of $735 million.

Analyst's Opinion

The analyst has maintained a Hold rating on the stock but refrained from providing a price target.

White said, “Although the content on Netflix has been exceptional over the past couple of years, nefarious forces appear to be lurking beneath the surface of Netflix’s post-lockdown recovery, either in the form of a slower-than-expected healing process after the pandemic-driven pull forward, a weaker-than-expected global economy, or a platform that has simply hit a near-term growth wall.”

Consensus Rating

Overall, the stock has a Moderate Buy consensus rating based on 17 Buys, 15 Holds and two Sells. Netflix’s average price target of $501.48 implies 43.1% upside potential. NFLX stock closed 1.8% up on Wednesday at $350.43.

Website Traffic

TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (NYSE: SEMR), the world’s biggest website usage monitoring service, offers insight into Netflix’s performance.

According to the tool, Netflix’s website traffic registered a 1.1% rise in global visits in March, compared to February. However, the website traffic has declined 9.1% year-to-date against the same period last year.

Conclusion

NFLX has lost 33.3% in the last three months, 44.7% over the past six months, and 35.1% during the last year. This is because the platform has been facing fierce competition from new players that have entered the video streaming market since the onset of the COVID-19 pandemic. It has now become crucial for the company to report upbeat quarterly results to regain investors’ confidence and get the much-required boost.

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Shares of streaming entertainment kingpin Netflix (NFLX) have been plunging considerably lower of late, now down around 50% from their peak levels at ~$700 per share. With shares sagging around the $350 per-share mark, questions linger as to whether the former entertainment behemoth is worth a second look on the dip.

Though Netflix is still a leader that'll be tough to top in streaming, the competitive forces have grown so rapidly. With the pandemic tailwind now gone, Netflix may face its toughest competitive fight since its days clashing with Blockbuster and its mail-in DVDs.

Netflix rose out on top at that time as a pioneer in the Streaming Video-on-Demand (SVoD) space. As people become spread across a wide range of video subscription services, though, the staying power of Netflix will be propelled to the forefront.

Indeed, the average consumer likely has video subscriptions that go far beyond Netflix. Arguably, the SVoD space is becoming less convenient, with so many options out there. Further, big tech titans have pretty much thrown in their video services alongside a wide range of other services, most notably music and photo storage. For now, I am neutral on the stock.

Netflix's Price Increases Could Weigh on Growth

Although Netflix has demonstrated considerable stickiness and pricing power up until now, it remains to be seen what happens to the entertainment behemoth once a recession happens and consumers are forced to tighten.

Video streaming services are quite discretionary in nature. With Netflix hiking prices amid rampant inflation, it's unclear how consumers will react this time around, especially given the price of necessities, rent, and food has been off-the-charts.

Though we're not in a recession yet, consumers certainly feel the pinch. The inverted yield curve, which could point to a recession in 2023 or 2024, also does not bode well for discretionary firms.

If anything, Netflix's recent price hikes could work against it, given rivals will be fighting for a share of your average consumer's streaming budget, which could fall if we were to head into a Fed-induced economic downturn.

Indeed, questions linger as to whether Netflix's last quarter of slowed subscriber growth is just the start of a sustained trend lower. Though Netflix has a ton of great content, I think the company would have been better off absorbing the blow of inflation. The last thing investors want to see is a further deterioration in subscriber growth in the face of great economic uncertainty.

Netflix's Rivals are Getting Stronger

To offset slowing growth trends, Netflix needs to improve the value proposition for its users, as its big-tech bundling peers like Apple (AAPL) have been. Arguably, the Apple One bundle is hard to stack up against, with gaming, video, cloud storage, fitness, and news services at a reduced price.

Apple's streaming service, Apple TV+, may come up short versus the likes of a behemoth like Netflix. Still, Apple TV+ has come a long way since its days as a freebie that many Apple users passed up on. Apple's Oscar-award-winning CODA itself is gaining considerable attention, as too is sci-fi thriller Severance, a high-rated series that looks to "rhyme" with that of Netflix's Black Mirror.

Indeed, the Ben Stiller-directed series Severance and other intriguing additions (think Friday Night Baseball) to the Apple TV+ platform are starting to tilt the odds in favor of the platform over the likes of a Netflix, especially for some of the more price-conscious consumers out there who may be reluctant to accept the fact that prices are headed higher.

Netflix Needs to Go Beyond Video to Keep its Growth Strong

What can Netflix do to improve the value of its own service? Obviously, a higher quantity and quality of video content will be needed to keep growth alive in a more competitive landscape.

However, the firm may need to go beyond just video. It's not a mystery that Netflix has video-game ambitions, but it's way behind in the game (forgive the pun, please), with only a few mobile offerings aimed at casual gamers.

I'd argue that Netflix should be looking to take a page out of Microsoft's (MSFT) playbook by making a big acquisition to bolster its footing in gaming. Otherwise, it could be hard for consumers to stand by as rivals drive down the price of video services.

It's not just gaming where Netflix can thrive; live sports is another arena (again, forgive the pun) in which the firm can better compete against the likes of an Apple TV+ or even a sports-focused service like DAZN.

With Apple in the running to win the rights to stream NFL Sunday Ticket, it seems as though Netflix may need to hustle to differentiate itself in the discretionary entertainment scene, which is growing to encompass more than just movies and series.

Wall Street's Take

Turning to Wall Street, NFLX stock comes in as a Moderate Buy. Out of 35analyst ratings, there are 18 Buy recommendations, 15 Hold recommendations, and two Sell recommendations.

The average Netflix price forecast is $508.57, implying upside potential of 45.5%. Analyst price targets range from a low of $342.00 per share to a high of $700.00 per share.

The Bottom Line on Netflix Stock

Netflix is down, but it's not out. Still, with an increased risk of a recession, recent price hikes and a crackdown on account-sharing may do the firm more harm than good amid its growth slowdown.

As the company explores new growth verticals (sports or gaming), the stock can have the means to bounce higher again. Until then, the road could prove rather bumpy for the former market darling facing competitive pressure from all sides.

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I am bullish when it comes to Netflix (NFLX) stock since it has dropped considerably since the start of the year.

There has been a significant dip in most areas of the economy recently.

However, given the current correction in the market, there are innumerable tech companies that offer great upside, one of them being Netflix.

Netflix has revolutionized the way we watch TV shows and movies by offering a wide variety of content that you can watch at any time -- there is no need to wait for the next episode or movie to come out.

Netflix has achieved success by focusing on its brand image, and customer experience. The company has accomplished this by using a combination of personalization, and AI technology.

Netflix uses AI to ensure that its users get the best experience possible. For example, Netflix uses machine learning algorithms to predict what type of content you will most likely be interested in watching next.

While in the past, Netflix was the only streaming service that many people used, companies like Walt Disney (DIS), Amazon (AMZN), and Apple (AAPL) have provided a lot of great competition in recent years.

However, Netflix has managed to hold on to its crown so far. Plus, the company's annual revenue in 2021 is around $30 billion. Netflix is growing like never before and shows no signs of stopping.

Rate Hike

More people are signing up for subscriptions every day, so it's natural for the companies that provide this service to be raising rates. Netflix is no different.

The standard plan will cost $15.49 a month, while the basic subscription will stay at $9.99. The premium plan will go up by $2 per month to match the increase in consumer demand.

One of the main aspects investors will be looking at is Netflix's price point. Over the years, Netflix has prided itself on providing quality entertainment at an attractive price. However, Netflix will be spending more on content in the coming years. It's estimated that it will pay $17 billion in 2022, increasing 57% from what it spent in 2020.

Hence, while it's still understandable that the company is hiking prices to keep up with consumer demand, the one aspect you cannot ignore is that its content budget is rising with each passing year.

To fund content, Netflix will have to implement some models that increase the cost of its service. The entertainment company can achieve this through occasional price increases or introducing a new password lock for its streaming service.

The streaming giant has not indicated that it is looking into adding an ad tier, which can become a new revenue stream. Therefore, consumers can expect more price increases in the future.

What Options Does Netflix Have?

Netflix has probably seen its best days in the United States and Canada (UCAN) region. That territory is saturated, and you cannot expect more growth from this region.

Latin America and the Asia Pacific are expected to lead growth in the coming years. Europe and MEA will be a bit smaller, but will still likely remain very prevalent in the next few years.

Netflix is continuously looking for places to base its future growth. Since these regions have the largest populations, this decision will affect them. However, the company will have to sacrifice margins in these areas.

In India, Netflix starts at $2.60 for all devices or $2 if you only use mobile. The per capita income in India is $1,947.417 versus $68,309 for the U.S. in 2021.

It remains to be seen how patient the average Netflix investor will stay with this strategy. Investors should ensure that Netflix is still in a good position since it consistently converts revenues into operating income.

By 2021, the company had an unfavorable $159 million in FCF. Netflix has been investing heavily in content and increasing its service. Therefore, it will take time for the company to grow free cash flow sustainably. That is something investors will have to live with.

The positive angle to show this development is that the company with the best content will dominate streaming. So far, Netflix's ratings are higher than all other streaming apps.

Wall Street's Take

Netflix's stock has performed better than many other companies in the last three months. Thirty-five Wall Street analysts have come up with 12-month price targets: 18 are Buys, 15 are Holds, and two are Sells.

The average Netflix price target is $510.89, implying 45.3% upside.

Bottom Line on Netflix

Netflix has revolutionized how we watch TV shows and movies. By providing a wide variety of content from all genres, Netflix has become the go-to place for binge-watching.

Netflix is also one of the most successful companies globally, with almost $30 billion in annual revenue and over 222 million subscribers worldwide. With such success, it's no surprise that Netflix has been on everyone's lips as an investment opportunity.

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Netflix (NASDAQ: NFLX) is having a rough first few months in 2022. Due to multiple factors, including rising competition and headwinds from the economy's reopening, the stock is down over 40%.

Netflix (NASDAQ: NFLX) will report first-quarter 2022 earnings on April 19. Investors will be zoomed in on subscriber totals.

The S&P 500 Information Technology index is down nearly 14% from its high. That steep decline reflects Wall Street's uncertainty regarding the future of the economy. Many investors are worried that, with inflation at a 40-year high and geopolitical conflict threatening to pus

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