Key points:
- Wedbush analyst Michael Pachter upgraded Netflix to Outperform from Neutral
- Pachter cites forthcoming staggered releases as prominent viewing drivers
- Netflix need to focus on reducing churn in order to maintain subscriber growth once again
2022 hasn’t been kind to Netflix (NASDAQ: NFLX); the stock has lost almost 70% of its total value since the beginning of the year, and is slowly eating away at strong gains made over the last 5 years. Fears surrounding subscriber growth hit the company early in the year, but sentiment continued to drag down Netflix shares prior to its Q1 earnings release, which acted as a sort of final blow for Netflix bears, confirming the worst fears. For the first time in company history, Netflix recorded a loss in subscribers.
It’s been a tumultuous time for the streamer over the last few months, with investors left curious about Netflix’s future trajectory in the face of rising competition and a pattern of slowing growth. However, Wedbush analyst Michael Pachter just upgraded Netflix shares to Outperform from Neutral on a $280 price target.
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Pachter still believes Netflix to be a compelling investment and argues that the company is well positioned to exceed its Q2 guidance. Underperforming on Q1, investors might be convinced that this pattern will likely continue. However, due to show staggering, Netflix is primed to welcome back viewers for the forthcoming release of popular show Ozark, followed by Stranger Things the following quarter. Whilst it is likely that downbeat guidance might remain in Q3, staggered releases should reduce churn, and in turn welcome back stronger levels of growth.
By focusing on reducing churn, Netflix is focusing on maintaining regular streamers; creating a brand out of loyalty. The sooner the company can reduce churn by staggering popular content, the sooner we will see an uptick in subscribers and a return to bullish price action.