Netflix shares dropped on Monday following a downgrade from CFRA.
Analyst Kenneth Leon lowered his rating for Netflix (ticker: NFLX) shares to Sell from Hold, and trimmed his target for the stock price target by $7, to $238. Netflix fell 6.1% to $226.54 on Monday, and was one of the S&P 500’s worst-performing stocks.
“After realizing 40% price gains since mid-July lows, we think NFLX shares may underperform S&P 500 Index for the rest of 2022,” Leon wrote.
The analyst believes Netflix will have a rough second half of the year. He said earnings per share and Ebitda, or earnings before interest, taxes, depreciation, and amortization, are likely to come in lower in the second half than in the first half.
“The key catalyst for NFLX — introducing new ad-pay subscription plans — may not be visible until 2023,” Leon wrote.
The stock has lost 62% this year, and analysts have grown more cautious about the company over the past few months.
Of the 46 analysts covering the shares, only 28% still rate them at Buy, while 57% rate them at Hold and 15% at Sell, according to FactSet. Last September, 76% of analysts had Buy ratings, 15% rated Netflix at Hold, and 9% had it at Sell.
Analyst hesitance comes even as Americans are spending more time watching streaming media than cable, with Netflix topping the charts as the most-watched streaming service in July, according to recent data from Nielsen. Rising competition in the streaming industry remains a main concern for Wall Street, with new entrants threatening Netflix’s dominance in the space.
Comments