Major investment bank JPMorgan has reportedly cut the stock-price target of Netflix in half, i.e., from $605 to $300, after the streaming giant said on Tuesday that it had lost 200,000 subscribers from its platform in the first quarter.
JPMorgan said in ratings downgrade that one of the factors was increased competition in the streaming services, highlighting the bank’s bearish view on Netflix.
Netflix’s downfall in subscribers is a first in a decade and forecasts another loss of 2 million in the current quarter. Shares fell as much as 39% after the news, hitting an intraday low of $212.51, lowest since January 2018, and putting the shares of Netflix lower that the investment bank’s price target.
JPMorgan has also cut its ratings on Netflix from overweight to neutral, joined by several other downgrades from Wall Street.
Doug Anmuth, analyst at JPMorgan, stated that in the first quarter of 2022, the OTT platform conceded to every crucial point of the bear thesis. These first three months were seen as a "sea change quarter" for Netflix.
According to the investment bank, the streaming service’s management has acknowledged having a relatively high household penetration rate with account sharing, a slowdown in gains due to the pandemic, and increased competition.
Netflix estimates that login credentials for its service are currently being shared in over 100 million households. On the other hand, it is also facing tough competition from other media brands that have released their own streaming platforms, such as Disney having Disney+ and Hulu, while the recently merged Warner Bros. Discovery has HBO Max and Discovery+.
The investment bank added that the near-term visibility on Netflix is limited, having sliced down its outlook for this year’s net addition in subscribers to half as well, from 16 million to 8 million.
Anmuth further said that there won’t be much activity apart from the new lower stock price for Netflix, and that the firm is looking for greater confidence in accelerating revenue, restoring subscriber growth, and increasing development velocity in account sharing as well as advertising.
Source credit: https://www.businessinsider.in/stock-market/news/jpmorgan-cuts-its-netflix-stock-price-target-in-half-says-the-streaming-giant-has-checked-every-box-of-its-bear-case/articleshow/90965404.cms