Speculation regarding Netflix’s (NASDAQ: NFLX) growth prospects has thrown the world-leading streaming service into uncertainty. From 2018 to late 2021, Netflix shares surged upwards as the company benefited from sector domination and a consistent rise in global streaming capabilities. On the tail of 2021, Netflix fell victim to strong selling activity; with fears that rising competition and ulterior headwinds were weighing on the high growth expectations of the company. The key metric for Netflix investors is subscribers. The company needs to continue growing at a rate that doesn’t allude to a slowing curve; which was the picture in late January this year.
Following the company’s Q4 results, sellers took to Netlfix stock after the streaming service announced it expected the addition of just 2.5M subscribers, much lower than 3.98M subscribers the previous year. Price targets were lowered across the board as Netflix executives pointed to a tightening market, with rising competition like Roku and Amazon Prime stealing some of the limelight.
The tide could be changing for Netflix investors, with Wells Fargo analyst Steven Cahall pointing arguing that current shares could be floored with regards to the current EV/Subscriber multiple. Cahall, after a ‘deep dive’ into subscriber penetration, argues that long-term net subscriber adds are “more likely 20M or better than 15M” – meaning that steady, solid growth may well guide Netflix back into bullish territory.
Interestingly, the Wells Fargo analyst also outlines the growing global connectivity landscape; which suggests the addition of 110M-plus new broadband and mobile phone connections per year for the coming few years. Confidence is brewing once again for Netflix stock, and with Wells Fargo’s price target of $600 – the upside for NFLX is looking more than substantial.
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Oliver is a financial writer and analyst specialising in the US stock market, with years of personal experience in understanding micro/macroeconomic structures, market trends and fundamental analysis.