Netflix Stock Tumbles After Goldman Downgrade, Price Target Cut

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Netflix stock fell sharply on Friday after Goldman Sachs downgraded its shares to “Sell,” from “Neutral,” amid a threat of a “consumer recession.”

Stock in Netflix tumbled by $9.07, or nearly 5 percent, to $183.74 in late day trading following analyst Eric Sheridan cutting his price target for company shares to $186 from $265 each as the video streaming giant turns from a focus on subscriber growth to profitability.

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“We downgrade Netflix to sell (from prior neutral rating) as we have concerns around the impact of a consumer recession as well as heightened levels of competition on demand trends (both in the form of gross adds and churn), margin expansion, and levels of content spend and view Netflix as a show-me story with a light catalyst path in the next 6-12 months,” Sheridan wrote in a June 10 note.

The Goldman Sachs analyst isn’t alone as Wall Street waits to see how Netflix rights its ship and regains favor with investors after the streaming giant disclosed a loss of 200,000 subscribers for the first time in years.

Sheridan cautioned Netflix could yet see a rebound in subscriber growth if rival streaming platforms slowed their own international expansions and the streamer speeded up price increases due to innovations like gaming. And he added Netflix could potentially see gains from a password-sharing crackdown and launching ad-supported tiers.

But that was further out as Netflix had still to get through a possible recession and its impact on subscriber retention and churn.

“We are lowering our 2022-2023 revenue estimates to incorporate a greater probability of a weaker macro environment. More specifically, we modestly lower our paid streaming subs across every region but incorporate higher ARPU levels in the US in 2024 and beyond to reflect Netflix’s initiatives around its ad-supported tier and password sharing,” Sheridan added.

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