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Topline
\nShares of streaming giant Netflix tanked over 6% to kick off the week\u2014adding to already steep losses so far this year\u2014after yet another Wall Street analyst grew more cautious about the company\u2019s business prospects and warned that the stock could struggle for the rest of the year.
\nYet another Wall Street analyst recently turned bearish on the stock and warned of further declines. ... [+]
Key Facts
\nDespite a rebound in recent weeks, Netflix\u2019s stock was one of the worst-performing stocks in the S&P 500 on Monday, falling more than 6% to just under $226 per share.
\n \nAfter realizing gains of more than 40% since hitting a low point in mid-July, Netflix\u2019s stock is likely to \u201cunderperform\u201d the rest of the market through the end of 2022, according to Kenneth Leon, Research Director at CFRA Research.
\n \nHe lowered his recommendation on the stock from a \u201chold\u201d to a \u201csell\u201d rating in a recent note to clients, slashing his price target by $7 to $238 per share, which was slightly lower than Friday\u2019s closing levels.
\n \n\u201cThe key catalyst for Netflix\u2014introducing new ad-pay subscription plans\u2014may not be visible until 2023,\u201d Leon points out, though he adds it could potentially help revive flat to lower subscriber growth so far this year.
\nWhile Netflix struggled with low operating and free cash flow in the most recent quarter, those metrics should improve, the CFRA analyst predicts, though ongoing challenges to the business include \u201cinflation and lower discretionary consumer spending.\u201d
\nThe stock has lost more than 60% this year, with analysts growing more bearish in the past few months over the company\u2019s slowing subscriber growth and as it faces increased competition from rival streaming services.
\nSurprising Fact
\nOf the nearly 50 Wall Street analysts covering Netflix shares, just under a third still have \u201cbuy\u201d ratings on the stock\u2014less than half the amount of nearly a year ago, according to FactSet. In terms of Netflix share ownership and trading activity over the last six months, hedge funds have been net buyers of the stock, though most other groups have been selling shares. Investment advisors and private wealth managers have been net sellers, while mutual funds in particular have been dumping shares at by far the fastest clip, FactSet data shows.
\nKey Background
\nNetflix was among 2020\u2019s pandemic stock darlings, jumping nearly 70% that year as stay-at-home measures boosted growth. 2022 has been a different story as investors pull back, but Netflix has still been one of the best-performing stocks in the S&P 500 as the market rebounded from its low point on June 16. Shares of the streaming giant have jumped roughly 30% since then, compared to the benchmark index\u2019s nearly 15% gain. Netflix\u2019s stock has started to decline again in recent sessions, however, as the recent market rally starts to fizzle out. The stock market widely fell on Monday\u2014led by a decline in tech stocks\u2014amid increased concerns about Federal Reserve rate hikes and warnings from Wall Street analysts that the recent bear market rally is \u201cgrinding to a halt.\u201d
\n\n\nFurther Reading
\nFord, Tesla And Netflix Are Among The Best-Performing Stocks During This Summer\u2019s Massive Rally (Forbes)
Dow Falls 600 Points As Experts Warn Bear Market Rally Is \u2018Grinding To A Halt\u2019 (Forbes)
\nBank Of America Warns Of \u2018Textbook\u2019 Bear Market Rally, Predicting New Lows For Stocks (Forbes)
\n\nTech Stocks Are Leading Markets Higher Again, But Analysts Split On Whether Rebound Will Continue (Forbes)
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