Netflix According to some stock market analysts, the story is far from over.
The streaming giant’s shares fell nearly 7.5% on Wednesday after the company’s earnings report for the first quarter. Although Netflix surpassed earnings and sales estimatesA sharp drop in subscribers weighed on the stock.
However, market watchers like CNBC’s Jim Cramer largely say this isn’t the final quarter for Netflix.
Here are some of their settings:
Tom Rogers, a longtime media mogul who is now the executive chairman of Engine Media, said Netflix still has the upper hand in its industry:
“I’m not particularly fond of the idea that their programming was thin. They did a lot better at having new programming during the pandemic than anyone else. They had some very big shows out there at that point – ‘Bridgerton,’ ” Lupine. “But look, it was a surprise they slowed down a little. Did that derail the Netflix thesis? No. Remember, they missed over 2 million two years ago [subscribers] in the quarter, the stock was down 10%, and [subscribers] got out of there. From there, ratings rose. Last year they had a quarter of just 2 million [subscribers]. That quarter they hit 4 million [subscribers]. Look here, [subscribers] will be lumpy. It suggests that it’s not that easy to build subscribers in the streaming world. I think others will struggle with indolence even more than Netflix. But if I had to say, would I prefer Netflix’s hand to anyone else in the streaming world? Absolutely.”
Rich Greenfield, partner and media and technology analyst at LightShed Partners, advised against getting caught up in the Netflix negativity:
“This quarter was disappointing. There is no getting around it … the forecast even for the second quarter is more disappointing than the results of the first quarter. Still, I would like to remind everyone who is watching today: this has actually happened many times Reality Predicts Netflix is getting harder and harder every quarter as the subscriber base has grown. The size of the Beats and the size of the Misses have increased noticeably. I mean, if you go back, I remember going to “Squawk” in the US in mid-2019 after that pressure in the second quarter. We all have a habit of over-extrapolating a quarter and trying to change the entire future of the world. I think if you take a step back, the reality is what is going on. Everyone is switching to streaming. You have obviously seen [Comcast] Jump in with Peacock. You saw Discovery. You saw Paramount +, part of Viacom. Everyone is moving towards streaming. The best content is moving towards streaming. Cable cutting is speeding up, and Verizon just reported. … They’re 7% lower year on year for video subscribers. That’s a pretty insane rate of decline among video subscribers. Their parent company Comcast is talking about losing more than 2 million video subscribers in 2020. So the underlying trend of linear to streaming shift is just beginning, and remember that on a global basis, there is only one thing to keep in mind: Netflix has 27 million subscribers across the Asia-Pacific region. It’s a market with hundreds of millions of potential subscribers over time. So again, it’s very easy to get caught up in the negativity and get upset about the Q1 numbers. The reality is that there is still a long way to go and we are still quite early in the transition to streaming television. “
Cramer, host of CNBCs “Bad money,” said he could see the $ 508 stock drop to around $ 490 per share:
“I think they reduced the risk. I think they … created an outlook that is basically surpassable and not necessarily the right one. These people weren’t that good at predicting. I think the most important line in the whole call was [Netflix CEO] reed [Hastings] Say, listen, there are 800 million TVs on top except China. So that’s a lot of room to grow. I agree and I think that what they showed they were constrained by. I don’t know, I mean, I think this is an opportunity. I really do. I mean, maybe they can cut it down to 490, but … I firmly believe these guys are so confident and it’s not made up. $ 5 billion buyback. They fix the balance sheet. There are so many good things that I still think they’re having a great time. Someday there will be a conference call that literally says, “OK, maybe things have turned out.” It’s not this one. I mean this one just pulled it off and don’t worry, and I agree with you. I think this is a very good story. “
Will Power, Senior Research Analyst at Baird, saw the decline as a buying opportunity:
“We believe there is still a lot of runway to go. And look, you have to keep in mind that this was a business with over 200 million subscribers. So whether you add 4 million or 6 million in a given quarter, it really doesn’t Don’t move the needle too much, and I think a couple of areas where we find a lot of comfort is the fact that engagement is still growing year after year, according to the company, and that speaks to the long-term opportunity and pricing power of the model And churn remains pretty low and lower than what I think people would have likely expected to get out of the pandemic. So when we look at the long-term opportunity, penetration and uptrend, so we’re doing this as a buying opportunity. “
Heather Moosnick, CEO of Moosnick Media Consulting Group and former executive of Hulu, had her eyes on the competition in Hollywood:
“In many ways this Q1 story is a story of big Hollywood studios that won the battle. It remains to be seen whether they’ll win the war. Now I agree that Netflix and that still have a lot of leeway So have other streamers. With 200 million subscribers worldwide they are really striving for linear TV. So there are almost 800 million TV subscribers worldwide outside of China, and that leaves a lot of headroom for that. But in the first quarter we’re seeing some really interesting ones Trends when Hollywood studios offer their services. Disney + hits over 100 million [subscribers]and over 95% of new video streaming service subscribers in the US were non-Netflix in the first quarter. That speaks for the rise of these direct-to-consumer services in Hollywood. “
Mark Mahaney, Senior Managing Director and Head of Internet Research at Evercore ISI, also suggested buying the dip:
“Every time you get a Netflix result, ask yourself: are you more or less confident? [subscriber] Growth, Margin Expansion, and RPU, The Revenue They Can Make Per User? And I thought the big question mark was really that [subscribers] that came from the last quarter. They showed record high margins. … There has been RPU growth even though they are shifting in the middle towards poorly paying markets or economies. So you got two out of three things right and our view of those [subscriber] Paying is that you will have pull forwards. It is influenced by the table of contents. The stronger the content, the better the content [subscriber] Numbers. The weaker the content slate, the softer it is [subscriber] Numbers. In the long run, this market, the whole entertainment market, is moving towards streaming and towards a streaming bundle, and Netflix will almost certainly be part of that. So if I go soft anywhere, I think they can make it up for it later [subscribers]. That’s why we like this as an entry point. This is not the back-up-the-truck price, but a back-up-the-minivan. “
Disclosure: Peacock is the streaming service from NBCUniversal, the parent company of CNBC. Comcast is the parent company of NBCUniversal.