NEtflix (NASDAQ:NFLX) the stock has fallen over 67% this year. It’s also down about 72% from its 52-week high. While there are multiple reasons, including macro headwinds and competition, for the slump in NFLX stock, what irked investors most was the sequential decline in paying subscribers.
Netflix lost 200,000 subscribers in the first quarter. Additionally, the company expects to lose even more paying subscribers (about 2 million) in the second quarter.
Still, Netflix announced a series of moves to re-accelerate growth, boost engagement, and increase average revenue per member. These measures include an increased focus on content, a crackdown on password sharing, and the possibility of cheaper subscriptions with ads.
However, will these actions be enough to re-accelerate growth and propel NFLX stock to 2021 levels?
Analyst weighs himself in
The sharp drop in price has made Wedbush analyst Michael Pachter bullish on NFLX stock. The analyst stated, “We are taking the recent share price weakness as an opportunity to raise our investment recommendation for Netflix.”
While Pachter is bullish on Netflix’s prospects, he doesn’t expect NFLX stock to reach 2021 levels for many years. While the analyst is optimistic about the announced changes that will boost growth, he doesn’t expect those changes to “happen quickly.”
He added, “The sooner the company demonstrates its commitment to reducing churn by releasing new content over multiple weeks, investors will see subscriber numbers surge and their confidence in Netflix’s business model restored.”
Still, the analyst expects NFLX to reach the $280 price target (41.8% upside potential) within a year. Additionally, Pachter expects Netflix to beat its Q2 guidance and benefit from the “staggered release date for Stranger Things.”
While Pachter is optimistic, most Wall Street analysts remain aloof given the ongoing challenges. NFL stock has a consensus Hold rating on TipRanks, based on eight buy, 28 hold, and three sell recommendations. Due to the recent correction, the average price target of $299.93 represents a 51.9% upside potential.
Netflix is without a doubt a solid company that remains well-positioned to capitalize on the growing adoption of connected TVs through its strong content. Additionally, its ability to increase price and focus on increasing average revenue per member bodes well for long-term growth.
However, increased competition, saturation in the US and Canadian markets, and ongoing macro and geopolitical headwinds could spoil the game in the near term.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.