Netflix (NFLX) fails on Wall Street. The streaming giant’s shares have fallen 52% since hitting an all-time high in November 2021. So far, 2022 has not contributed to the downside, with stocks down a whopping 45% since the start of the year.
“The upside is a concern,” Dave Heger, senior equity analyst at Edward Jones, told Yahoo Finance Live, citing the company’s disappointing subscriber outlook as a catalyst for the sell-off.
In its latest earnings report, Netflix said it expects to add 7 million paying subscribers in the current quarter, down from the 7.82 million analysts had expected. That would mean a 27% drop from the 9.6 million subscribers Netflix added in last year’s quarter, which was a record high for quarterly paid net additions.
However, Heger suggested that now is the right time for investors to buy the dip.
“The valuation now looks more attractive than last year,” the analyst explained. He added that the current market levels provide “a good opportunity to buy shares.”
“Of course, the question arose of what the long-term growth prospects of Netflix were, and those expectations were slightly lowered. [but Netflix remains] a company where we still see room for subscriber growth worldwide,” he continued.
Heger went on to cite the streaming giant’s expanded presence in international markets, in addition to its ability to raise prices in response to “growing content and the rising cost of its services,” as growth potential for further market penetration and success.
“The valuation now looks more attractive than what we saw last year…” Dave Heger, Edward Jones Senior Equity Analyst at Netflix.
The platform has also engaged in mergers and acquisitions to compete in a crowded media space. Compared to its streaming counterparts, Netflix “has been a bit more M&A active,” Heger said.
The story goes on
“Lately, the company seems to want to add content to the gaming space, and they’ve been talking a lot more about boosting their online gaming credibility. It’s a new way to add value to Netflix subscribers and could possibly help justify the price hikes they’ve been making over time,” he said.
Netflix leans towards M&A as streaming competition intensifies
In general, more businesses are experimenting with raising prices to fight inflationary headwinds.
Despite worries of a looming recession, Heger suggested that Netflix could weather any economic storm, as consumers typically turn away from entertainment out of the home first.
“At least historically, we’ve seen in the traditional pay TV world that subscribers tend to hold on to home entertainment… even in tougher times,” he concluded.
Alexandra is a senior entertainment and food reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193
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