Netflix Faces Risks as Growth Forecasts Cast Doubt
Shares of Netflix received a downgrade as concerns arise about the company's growth forecasts. Analysts also raise caution about operating leverage and potential challenges ahead, including earnings report and price hike plans.
Troy D. Hanson
October 13, 2023
Analyst Downgrades Netflix Stock Amid Concerns
Shares of Netflix (NFLX) received a downgrade from Wolfe Research's Peter Supino, who believes that the company's growth forecasts for the next few years are risky. Supino is concerned about the slower-than-expected adoption of Netflix's advertising-supported tier of service as well as signs of members downgrading to lower-priced plans. This downgrade comes as the stock fell 1.1% in morning trading on Friday.
Potential Headwinds for Netflix
Caution Surrounding Operating Leverage
Another concern raised by Supino is the company's operating leverage. He notes Chief Financial Officer Spencer Neumann's comments, suggesting that it may be challenging for Netflix to maintain a three-percentage-point increase in margins annually. This caution stems from the anticipation of slower top-line growth compared to historical trends, indicating potential challenges ahead.
Earnings Report and Price Hike Plans
Investors eagerly await Netflix's third-quarter earnings report, set to be released after Wednesday's closing bell. The company's price hike plans may face untimely challenges amid a weakening economy and stock market, according to some analysts.