Could Netflix Stock Return to 2021 Levels Anytime Soon?
Netflix (NASDAQ: NFLX) stock has dropped over 67% this year. Further, it has fallen by 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 the most was the sequential decline in paid subscribers.
Netflix lost 200K subscribers in Q1. Further, the company expects to lose even more paid subscribers (about 2 million) in Q2.
Nevertheless, Netflix announced a slew of measures to reaccelerate growth, drive engagement, and increase average revenue per member. These measures include an increased focus on content, a crackdown on password sharing, and an option of lower-priced subscription plans with advertising.
However, will these measures be enough to reaccelerate growth and drive NFLX stock to 2021 levels?
Analyst Weighs InThe sharp pullback in its price has turned Wedbush analyst Michael Pachter bullish on NFLX stock. The analyst stated, “We are taking recent share price weakness as an opportunity to raise our investment recommendation on Netflix.”
While Pachter is bullish about Netflix’s prospects, he does not expect NFLX stock to reach 2021 levels for many years. While the analyst is optimistic about the changes announced to spur growth, he does not expect these changes to “occur rapidly.”
He added, “ the sooner the company shows its commitment to reducing churn by releasing new content over several weeks, investors will see an uptick in subscribers and their confidence in the Netflix business model will be restored.”
Nevertheless, the analyst expects NFLX to achieve the price target of $280 (41.8% upside potential) within a year. Further, Pachter expects Netflix to exceed its Q2 guidance and benefit from the “staggered release date for Stranger Things.”
While Pachter is upbeat, most Wall Street analysts remain sidelined given the ongoing challenges. NFL stock sports a Hold consensus rating on TipRanks based on eight Buy, 28 Hold, and three Sell recommendations. Further, due to the recent correction, the average price target of $299.93 represents 51.9% upside potential.
Bottom LineNetflix, without a doubt, is a solid company that remains well-positioned to capitalize on the increased penetration of connected TVs through its strong content. Moreover, its ability to increase the price and focus on increasing average revenue per member augur well for long-term growth.
However, increased competition, saturation in the U.S. and Canadian market, and the ongoing macro and geopolitical headwinds could play a spoilsport in the short term.
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