Netflix shares fell 8.27% in morning trading Thursday as investors gave the streaming behemoth a thumbs down despite generally positive comments from analysts following a mixed second-quarter report.
The stock fell $33.49, to $438.10 in heavy trading but remained near the top of its range following steady gains since early May.
Shares have changed hands between $211.50 and $485 in the past 52 weeks, and the stock ended Wednesday up more than 67% since the start of the year.
The world’s largest streaming service on Wednesday posted net income of $1.48 billion, or $3.29 per share, on revenue of $8.2 billion, falling short forecasts from analysts surveyed by Zacks for $2.83 per share on $8.26 billion revenue.
The company said it added 5.9 million paid subscribers in the quarter, ending June with a total of 238.4 million worldwide.
JPMorgan analyst Doug Anmuth raised his price target on Netflix to $505 from $495, according to TheFly.com, meaning he expects the stock to gain another 6% by the end of 2023.
He kept an “Overweight,” or “Buy” rating on the shares and recommended that clients buy the stock as it dipped, suggesting that while paid sharing between customers isn’t growing as fast as expected, he expects the effort to end account piggybacking will eventually be an important revenue driver for the streamer.
But Netflix’s lack of transparency around subscriber numbers for its different service tiers is one of the issues that left MoffettNathanson analyst Michael Nathanson concerned. He kept a target price of just $380 on the stock, suggesting he thinks it will drop back more than 20% by year’s end, and griped that “drivers of Netflix’s revenue growth are now more difficult to decipher than ever,” even as the company tries to move the Street’s focus to that metric and away from subscriber numbers.
“While Netflix was never the easiest company to model, the revenue inputs had some level of predictability,” the analyst wrote. With company guidance around subscriber growth and other factors, it was a fairly straightforward company to model, he said, despite some variability around subscriber numbers.
“Today, that could not be further from the truth!” the analyst wrote, keeping a “Market Weight,” or “Neutral” rating on the stock. “Without company disclosure around the number of ‘Extra Members’ being added to accounts as part of the password sharing crackdown, the number of users that crackdown has even targeted so far or any insight into the number of subscribers on the Standard with Ads tier, the drivers underpinning Netflix’s revenue growth are more unclear than ever, giving us less confidence in our ability to accurately model this company.”
“Given the sheer number of unknowns,” he continued, “it is hard to have any conviction to the upside or to the downside.”
Wells Fargo analyst said investors were “over-exuberant” on the paid sharing crackdown ahead of the results, and expects revenue acceleration to take longer, but added “we think it creates an entry point for patient, longterm investors” and kept a $500 price target on the stock.
The negative views were not shared by many analysts, a number of whom upped price targets on the stock, with Pivotal Research going up to $600.
The firm said the most important takeaway from the results is that the password sharing monetization effort has “gotten off to a smashing start with what appears to be a significant runway for growth” in regards to subscribers and average revenue per user growth.