There have been many pandemic era stars that have lost their luster as normalcy has resumed, but perhaps few narratives have changed as much as the one regarding Netflix (NFLX).
It might have always been inevitable the streaming giant would encounter a significant dialing down of the growth activity seen during the Covid lockdowns, but the extent of the downfall has been particularly eye-catching; along with losing subs – 1Q22 marked the first instance of Netflix losing subscribers in a decade – the share price has come crashing down – to the tune of 71% since the turn of the year.
And now, looking at its current valuation, Stifel analyst Scott Devitt is becoming “more constructive” on the shares.
“We believe the risk/reward has become more attractive as current valuation implies minimal incremental subscriber growth, in our view,” the analyst said. “At the current share price, we believe the market may be overlooking the multi-year opportunity for a return to sustainable subscriber growth, with optionality stemming from the company’s upcoming advertising-supported and password-sharing plans.”
Addressing the recent quarters’ slowing subscriber growth, management pointed to a variety of factors impeding progress. Competitive pressures, the macro environment, and the “prevalence of password sharing,” have all been cited as headwinds. While Devitt does not disagree that these have played their part and have had a “negative impact,” he thinks the main reason for the slow down lies elsewhere.
“We believe affordability challenges have had a more direct impact on the company’s ability to grow in international markets,” Devitt explained. In fact, Devitt notes that in many of the emerging markets where Netflix has yet to make a serious dent, the Basic plan is priced “at well over” 1% of monthly income.
There is a way to address this issue -- by adding an advertising-supported subscription tier, something Netflix now plans on implementing.
While Devitt thinks such an initiative can be a game changer, until further details emerge on this strategy, he sticks with a Hold (i.e., Neutral) rating, and lowers the price target from $300 to $240. Devitt, though, might as well have said Buy, given that figure is set to generate returns of ~40% over the coming months. (To watch Devitt’s track record, click here)
All in all, Netflix has 41 analyst reviews, split three ways: 9 Buys, 26 Holds, and 6 Sells. Overall, the consensus view here is a Hold, to wait and see. That said, like Devitt, most of the fencesitters appear to think the shares are now undervalued; going by the $281.84 average target, the stock is expected to add ~64% over the one-year timeframe. (See Netflix stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
Headquartered in California, Roku (ROKU) provides a popular streaming-content platform. I am bullish on the stock.
Many years from now, the 2020s might be known as the streaming renaissance. Going out to see a movie in a theater can be expensive, and COVID-19 lockdowns prompted people to stay indoors to save money and protect their health.
Amid this backdrop, Roku became a streaming star and the company's shares soared in value, for a while. Lately, though, Roku stock has approached pre-pandemic levels as a less accommodative Federal Reserve compels traders to dump their highest-flying stocks in favor of risk-off investments. Besides, one commonly cited valuation metric makes Roku shares seem expensive.
Is there any hope for a rebound in Roku stock, then? That's the billion-dollar question, and the bull camp should be glad to learn about Roku's collaboration with a famous name in retail. Additionally, takeover talk is circulating and while there are no guarantees, it's exciting to consider how a potential piece of good news could propel the Roku share price.
On TipRanks, ROKU scores a 8 out of 10 on the Smart Score spectrum. This indicates a potential for the stock to outperform the broader market.
Streaming Deal of the Year (So Far)The bigger they are, the harder they fall. This isn't always true, but Roku stock provides a textbook example of a falling star in the markets. Shockingly, Roku stock climbed from around $76 at the outset of the COVID-19 pandemic in the U.S., to $470 in 2021. However, it soon thereafter fell back down to $80 by mid-2022.
As Roku stock practically makes a round trip, it's understandable if investors are feeling nervous. Even after the share-price decline, Roku's trailing 12-month P/E ratio is still quite elevated, at 82.26. This might not be a deal breaker, but some value investors might consider it a red flag.
Still, if you believe that the streaming revolution is here to stay, then a small position in Roku stock could be justified. Indeed, one retail store behemoth clearly believes that Roku has staying power, even during a time of economic challenges such as high inflation.
Not long ago, Roku dropped a bombshell when it announced that Walmart (WMT) "will be the exclusive retailer to enable streamers to purchase featured products fulfilled by Walmart directly on Roku." The idea is to make it fast and convenient for streaming customers to "purchase directly at the time of inspiration," which is really just a fancy way of saying, "impulse-buy."
Here's how it might work. A streaming customer would see a must-have item for sale in a "shoppable ad" on his screen. Then, he could proceed to a checkout screen, and his payment details would be "easily pre-populated from Roku Pay," which is Roku’s payments platform.
Peter Hamilton, head of TV Commerce at Roku, suggested that the two companies are "making shopping on TV as easy as it is on social [media]." It's an intriguing concept, and one that could produce significant revenue streams for Roku and Walmart.
This Deal Could Be Even BiggerCan you imagine a more impactful development for Roku than a deal with Walmart? Nothing could possibly be bigger than that, right?
Actually, anything is possible, including a takeover of Roku, which could send Roku stock soaring if it happens. You won't find this on Roku's press releases page, but there's a report of "detailed internal speculation" that Netflix (NFLX) might attempt to buy out Roku.
It was even reported that takeover speculation has ramped up among Roku's employees. This doesn't guarantee that a buyout will actually happen, however. Nevertheless, it's mind-blowing to think about the implications of this event, if it actually transpires.
Basically, it would involve the combination of two streaming kings, thereby producing a streaming company that would be almost unbeatable. There is a question, though, of whether Netflix would actually want to acquire Roku.
Perhaps this is the silver lining for the decline of Roku's market cap. It means that Netflix could potentially acquire Roku at a steep discount compared to a year ago. Besides, Roku's business could be a great fit for Netflix. Apparently, a senior-level Roku employee said that a deal between Roku and Netflix would "align well in terms of culture, business, and current valuation," since Netflix wants to get into video advertising "and Roku has it."
Wall Street’s TakeAccording to TipRanks’ analyst rating consensus, ROKU is a Moderate Buy, based on 17 Buy, five Hold, and one Sell ratings. The average Roku price target is $152.26, implying 84.83% upside potential.
The TakeawayThe idea here isn't to hastily load the boat on Roku shares because the company might get bought out by Netflix. The last thing you need is to lose money because of a "buy the rumor, sell the news" event. In other words, Netflix might deny that it's planning to buy out Roku, and that could send Roku stock lower.
What's known for certain, however, is that Roku has a powerful partnership with Walmart. This could prove to be a watershed moment for Roku, so it's fine to add a few Roku shares if you feel that this collaboration will enhance the company's top and bottom lines.
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Shares of fallen streaming giant Netflix (NFLX) have endured a painful crash this year. The valuation reset is ongoing, and this market will find a new range for the former high-flyer to settle down in.
For now, many investors are likely to take a hit on the chin by attempting to catch a falling knife. Billionaire investor Bill Ackman took a quick loss by catching Netflix after its first post-earnings flop. The second round of earnings results was just as painful for shareholders reluctant to ditch the ailing FAANG stock in its trying moment.
Undoubtedly, FAANG companies are known to move past tough times en route to much higher multiples. It's their ability to continue raising the bar on growth that makes them such sought-after long-term holdings.
With the streaming world in chaos, Netflix came up with short-term-focused solutions, including the "freeloader crackdown" and price increases to shrug off inflation's impact.
Indeed, Netflix overestimated its pricing power, with the recent uptick in competitive pressures. Every media firm has jumped aboard the streaming bandwagon. Under the weight of all the players, this bandwagon isn't rolling as fast as it used to.
On TipRanks, NFLX scores a 7 out of 10 on the Smart Score spectrum. This indicates a potential for the stock to perform in line with the broader market.
Netflix: Streaming Rivals are Catching Up, FastIn a prior piece, I noted that big media's move into streaming was a hefty expenditure that lowered switching costs. Nonetheless, the disruptive impact of Netflix has been felt, and the rest of the industry has reacted accordingly. As media feels the pinch of the lower switching costs of streaming (consumers can easily cancel subscriptions in favor of new ones in any given month), the streaming wars are ongoing, with no clear winner.
At the end of the day, media and streaming is a game where the strongest, deepest content library will win. Content is king. Nothing has changed in that regard. Though Netflix has a robust content library, with more titles on the way, it's clear that the streaming giant no longer has the best relative content slate out there anymore.
Arguably, Disney (DIS) and its Disney+ platform seems to be the most engaging these days. As Netflix loses its luster, I find few things preventing the stock from crumbling come the next earnings report, which could reveal further subscriber losses.
Now, Netflix stock is getting cheap at around 15.9 times trailing earnings. But with some streaming rivals sporting single-digit price-to-earnings (P/E) multiples, the stakes are still high as the market continues its punishment of NFLX shares.
On the low-end, Paramount (PARA) boasts a 4.1 P/E, with Warner Bros. Discovery (WBD) commanding a mere 7.1 P/E. While Netflix is a bigger, better streamer than these two underdogs, I do think it's really hard to draw a line in the sand, as the streaming behemoth looks to hemorrhage subscribers in the face of a recession. For now, I am neutral on Netflix.
Netflix: Could an Ad-Based Tier Reignite Growth?A low-cost, ad-based tier may be the version of Netflix that helps the firm move through the coming economic slowdown. When times get tough, many may be more willing to sit through a few ads for a discount. While such an ad-based tier will eat away at the pricier flagship subscription service, I do think that such margin pressures will not last long. If anything, ads may be the future of Netflix.
The ad world has endured quite the shakeup in recent years. With Roku (ROKU) poised to team up with Walmart (WMT) to offer interactive ads that allow one to buy through the Roku platform, one has to think that such streaming-based ads are the way of the future.
Indeed, streaming ads hold a lot of potential. They could prove more effective than the user-targeted social-media ads that have come under fire in recent years.
If Netflix plays its cards right, ads could help propel the stock back on the growth track. Still, there's plenty of competition out there. At the end of the day, it's a paradise for consumers.
Wall Street's TakeAccording to TipRanks’ analyst rating consensus, NFLX stock comes in as a Moderate Buy. Out of 41 analyst ratings, there are nine Buy recommendations, and 26 Hold recommendations, and six Sell recommendations.
The average Netflix price target is $281.84, implying an upside of 60.55%. Analyst price targets range from a low of $157 per share to a high of $405 per share.
The Bottom Line on Netflix StockNetflix stock will eventually bottom out at a new P/E (likely in the teens). Still, such a low multiple discounts the company's innovative capabilities.
For now, ads and the video-game push and their implications on long-term growth are a major unknown. If Netflix can out-innovate its peers on these two fronts, perhaps NFLX stock can find itself commanding a much higher growth multiple again?
Shares of fallen streaming giant Netflix (NFLX) have endured a painful crash this year. The valuation reset is ongoing, and this market will find a new range for the former high-flyer to settle down in.
For now, many investors are likely to take a hit on the chin by attempting to catch a falling knife. Billionaire investor Bill Ackman took a quick loss by catching Netflix after its first post-earnings flop. The second round of earnings results was just as painful for shareholders reluctant to ditch the ailing FAANG stock in its trying moment.
Undoubtedly, FAANG companies are known to move past tough times en route to much higher multiples. It's their ability to continue raising the bar on growth that makes them such sought-after long-term holdings.
With the streaming world in chaos, Netflix came up with short-term-focused solutions, including the "freeloader crackdown" and price increases to shrug off inflation's impact.
Indeed, Netflix overestimated its pricing power, with the recent uptick in competitive pressures. Every media firm has jumped aboard the streaming bandwagon. Under the weight of all the players, this bandwagon isn't rolling as fast as it used to.
On TipRanks, NFLX scores a 7 out of 10 on the Smart Score spectrum. This indicates a potential for the stock to perform in-line with the broader market.
Netflix: Streaming Rivals are Catching Up, FastIn a prior piece, I noted that big media's move into streaming was a hefty expenditure that lowered switching costs. Nonetheless, the disruptive impact of Netflix has been felt, and the rest of the industry has reacted accordingly. As media feels the pinch of the lower switching costs of streaming (consumers can easily cancel subscriptions in favor of new ones in any given month), the streaming wars are ongoing, with no clear winner.
At the end of the day, media and streaming is a game where the strongest, deepest content library will win. Content is king. Nothing has changed in that regard. Though Netflix has a robust content library, with more titles on the way, it's clear that the streaming giant no longer has the best relative content slate out there anymore.
Arguably, Disney (DIS) and its Disney+ platform seems to be the most engaging these days. As Netflix loses its luster, I find few things preventing the stock from crumbling come the next earnings report, which could reveal further subscriber losses.
Now, Netflix stock is getting cheap at around 15.9 times trailing earnings. But with some streaming rivals sporting single-digit price-to-earnings (P/E) multiples, the stakes are still high as the market continues its punishment of NFLX shares.
On the low-end, Paramount (PARA) boasts a 4.1 P/E, with Warner Bros. Discovery (WBD) commanding a mere 7.1 P/E. While Netflix is a bigger, better streamer than these two underdogs, I do think it's really hard to draw a line in the sand, as the streaming behemoth looks to hemorrhage subscribers in the face of a recession. For now, I am neutral on Netflix.
Netflix: Could an Ad-Based Tier Reignite Growth?A low-cost, ad-based tier may be the version of Netflix that helps the firm move through the coming economic slowdown. When times get tough, many may be more willing to sit through a few ads for a discount. While such an ad-based tier will eat away at the pricier flagship subscription service, I do think that such margin pressures will not last long. If anything, ads may be the future of Netflix.
The ad world has endured quite the shakeup in recent years. With Roku (ROKU) poised to team up with Walmart (WMT) to offer interactive ads that allow one to buy through the Roku platform, one has to think that such streaming-based ads are the way of the future.
Indeed, streaming ads hold a lot of potential. They could prove more effective than the user-targeted social-media ads that have come under fire in recent years.
If Netflix plays its cards right, ads could help propel the stock back on the growth track. Still, there's plenty of competition out there. At the end of the day, it's a paradise for consumers.
Wall Street's TakeAccording to TipRanks’ analyst rating consensus, NFLX stock comes in as a Moderate Buy. Out of 41 analyst ratings, there are nine Buy recommendations, and 26 Hold recommendations, and six Sell recommendations.
The average Netflix price target is $281.84, implying an upside of 60.55%. Analyst price targets range from a low of $157 per share to a high of $405 per share.
The Bottom Line on Netflix StockNetflix stock will eventually bottom out at a new P/E (likely in the teens). Still, such a low multiple discounts the company's innovative capabilities.
For now, ads and the video-game push and their implications on long-term growth are a major unknown. If Netflix can out-innovate its peers on these two fronts, perhaps NFLX stock can find itself commanding a much higher growth multiple again?
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Shares of streaming platform firm Roku (ROKU) are now sitting down around 83% from their all-time high hit just under a year ago. Despite the severity of the decline, ongoing rate-induced pressures, and rising competitive threats in the streaming space, innovation investor Cathie Wood is not yet ready to throw in the towel on the name. Arguably, she's grown even more bullish, scooping up shares on the dip.
Roku: Is a Netflix Takeover all it Has Going for it?With recent rumors surrounding a potential takeover by streaming kingpin Netflix (NFLX), Roku stock seems to be back in the headlines. Still, investors should take such rumors with a fine grain of salt. Netflix is in the business of creating content, and I find it doubtful the firm would want to get into the business of streaming hardware.
Streaming hardware just isn't the same growth engine it used to be. It's a commoditized product that faces tremendous competition, not just from big-tech firms but from next-generation smart TVs, which may render streaming hardware obsolete.
Does Roku face an existential threat as it looks to make a splash in content production? It's hard to say. I'd argue that Roku lacks a moat, making it vulnerable to more deep-pocketed rivals like Amazon (AMZN).
Had Netflix not been in such rough shape, I'm sure a Roku-Netflix deal would have made a lot of sense. With Netflix also attempting to pivot and regain its formerly rich valuation multiple, I'd argue that the firm is likelier to go down the route of organic innovation, rather than scooping up another firm with more than its fair share of baggage.
It's hard to stay bullish on Roku stock at these depths with a seeming lack of catalysts. However, I remain bullish, as the 3.8 times sales multiple is absurdly low and discounts the firm's recession resilience. And let's not forget that Roku can solve its problems through innovation. Roku is a Cathie Wood stock for a reason, after all!
For these reasons, I remain bullish, even as most other investors turn against the stock.
On TipRanks, ROKU scores a 8 out of 10 on the Smart Score spectrum. This indicates a potential for the stock to outperform the broader market.
Roku Teams up with Walmart on Intriguing Ad ConceptIn an intriguing move, Roku announced its partnership with Walmart (WMT) to bring e-commerce to televised ads. It's definitely not a concept that many consumers are familiar with. Still, it's one that could pay significant dividends for both firms, especially as the American economy heads for a recession.
Through the intriguing ads, Roku viewers can purchase items from Walmart through Roku's streaming service. While only time will tell if the partnership pays off, I find the move very interesting. And one that could mark a leg of growth for the ailing streamers.
It's an innovative concept, to say the least. And one that could find itself being copied by the likes of retail and streaming heavyweight Amazon.
Further, it's not just ads that could entice users to buy items via the Roku platform. Product placement and strategically-placed ads could mark the next frontier in digital advertisement. The one-two combo of product placement and the convenience of buying from ads within Roku, I believe, could be unstoppable.
The Walmart partnership signals that Roku is still very much innovating. The company realizes that stream sticks are commoditized, and it's ready to move on. I'm a big fan of Roku's dealings with Walmart and think it could be the start of a very fruitful relationship that could see the latter scoop up the former.
Recession on the Way? Roku Could Outpace RivalsIt's not just ads where Roku could innovate; Roku is a pioneer in the free, ad-based streaming tier with its Roku Channel. As Roku Channel gains more content, viewers could flood in, especially those who recently canceled Netflix to save money.
Arguably, the Roku Channel is one of the lowest-cost forms of entertainment (it's effectively free to Roku users), and that could begin to pay off as economic times get tough.
Wall Street's TakeAccording to TipRanks’ analyst rating consensus, ROKU stock comes in as a Moderate Buy. Out of 23 analyst ratings, there are 17 Buy recommendations, five Hold recommendations, and one Sell recommendation.
The average Roku price target is $152.26, implying an upside of 84.8%. Analyst price targets range from a low of $80.00 per share to a high of $240.00 per share.
The Bottom Line on Roku StockAlthough higher rates don't bode well for innovative growth firms like Roku, its recession resilience could more than offset potential rate-induced economic headwinds on the horizon.
Teaming up with Walmart on an intriguing new ad concept proves that Roku is unwilling to back down without a fight. Should the Walmart-Roku deal show promise, I'd argue that Walmart is a far better suitor than Netflix.
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