Updated at 7:08 AM EST
Netflix (NFLX) – Get Netflix Inc Report. stocks slumped lower on Friday after analysts at Goldman Sachs downgraded their ratings and price targets on the online streaming group amid soaring inflation and increasing competition.
Goldman Sachs analyst Eric Sheridan downgraded the stock to ‘sell’, while cutting its price target by $79 to $186 per share, citing broader consumer pressure and a growing number of rivals in the entertainment streaming market.
Netflix lost 200,000 subscribers during the first three months of this year and is expected to lose another 2 million by the end of the second quarter, thanks to what the company says is a combination of rising prices, increased competition, and password sharing, which Netflix estimates in about 100 million households. around the world.
“We have concerns around the impact of the consumer recession and increased levels of competition … and view Netflix as a show story with a light catalytic path,” said Sheridan. “We’re downgrading our paid streaming subscriptions a bit in each region.”
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Netflix shares were marked 4.12% lower in pre-market trading to show an opening bell price of $184.82 each, a move that would extend the stock’s decline this year to around 70%. Its stock value has fallen by more than $210 billion over the past six months.
Netflix’s first-quarter earnings were basically solid, with a bottom line of $3.53 per share that was ahead of the Street consensus estimate of $2.89 per share and group earnings that were 10% higher than a year ago, at $7.87 billion, and just below that. behind the analyst. ‘ estimated a tally of $7.93 billion.
Netflix also said it expects positive free cash flow for 2022 and beyond, with first-quarter free cash flow up 15.9% to $802 million.
It could also pivot to an ad-based model to offset slumping revenue growth, and be linked to its takeover of streaming service hub Roku. (ROKU) – Get Roku Inc . Report earlier this week.
DA Davidson analyst Tom Forte said in a recent study that Roku lacks a “myriad” of ways it can help Netflix in part thanks to its ability to “enable Netflix to target ads on the Roku platform to try to get consumers to restart the service.”
“For example, this could give Netflix the opportunity to showcase the first season of one of its shows on The Roku Channel as a way of inspiring consumers to subscribe to Netflix to watch the remaining seasons,” Forte said. “At a high level, it could help Netflix navigate its early forays into advertising.”