Netflix Slides After Stellar Results Were Not Stellar Enough: Wall Street Reacts

After initially spiking on Tuesday after reporting blowout earnings and solid guidance, Netflix has dropped as much as 3.4% now that investors have had a chance to digest the report and as some analysts said the roughly in-line subscriber outlook for the fourth quarter fell short of some investors’ high expectations.

But the real reason for today’s drop is that NFLX was priced to beyond perfection, with the stock rallying 22%% in the two months leading up to Tuesday’s results. Still, analysts largely viewed the report as solid, with several firms boosting their price targets on the stock and highlight the streaming giant’s line-up of current and future content, with “Squid Game” stealing the show.

Courtesy of Bloomberg, here’s what some of what analysts are saying:

Deutsche Bank downgrades the stock to hold from buy, citing the recent share advance

Wells Fargo (Overweight, PT to Street-high $800 from $700)

“Incrementally bullish” on co.’s long-term subscriptions and financials
Says stock “hardly inexpensive,” but Netflix’s consistent financial performance is “worth a premium”

Guggenheim (Buy, PT to $720 from $685)

Given the high investor enthusiasm into the report, says it feels results met rather than beat
Says the “reignited post-Covid content production cycle” is filling content slate, yielding direct member trend results

Evercore ISI (Outperform, PT to $710 from $695)

“This was a solid report card against very elevated expectations”
However, “the market might be a bit disappointed that the Q4 net adds guide wasn’t above the Street”

JPMorgan (Overweight, PT to $750 from $705)

Noting muted share reaction on beat, says “ho-hum” may be healthier for a stock that’s beaten S&P 500 handily since 2Q earnings
Says “Squid Game” gives Netflix greater visibility and confidence in the quarter

Barclays (Overweight, PT to $675 from $625)

Says 3Q net subscription adds beat and 4Q outlook should “provide some comfort to investors worried about a structural slowdown”
Given its content slate strength is likely to continue into Q1, Q4 momentum may spill over into next year

MoffettNathanson (Neutral, PT $470)

Says co.’s success “feels more like a random walk,” where their hit shows are first discovered by users, then amplified by the marketing engine
Argues Netflix’s strength doesn’t lie in their content development, but their unrivaled mix of global content spending, mass reach, advanced navigation

Piper Sandler (Overweight, PT $705)

Attributes subscriber growth to “Squid Game” and says 4Q content slate looks compelling
The recent Roald Dahl deal a “notable” opportunity for content geared toward younger audience

Cowen (Outperform, PT to $750 from $650)

Highlights co.’s retention in 2021 being higher than 2019 and 2020
Says content catalog and rising engagement driving low churn despite price increases

Morgan Stanley (Overweight, PT to $700 from $675)

Says the numbers highlight benefits of co.’s content scale and the “large” core international market expansion opportunity
“While the results and guidance are as ‘in-line’ as it gets for Netflix, that does not diminish the importance of validating the move in shares and future growth potential”

Truist Securities (Buy, PT $690)

“No big surprises, not much to complain about”

Oppenheimer (Outperform, PT to $750 from $620)

Expects Netflix’s large, hyper-local production operations combined with its ability to distribute content globally is creating a wider moat that “should allow it to replicate more Squid Game-type sensations over the next decade”

Bloomberg Intelligence

Says the 4Q subscriber outlook coming in at consensus is a more important indicator of normalizing trends than the strong 3Q new user results
“This lends credence to our view that a robust slate could smooth out subscriber volatility”

Source: Bloomberg