Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Netflix Facing New Execution Challenges Says Societe Generale

Published 14/06/2022, 17:14
Updated 14/06/2022, 17:14
© Reuters.

© Reuters.

By Sam Boughedda

Societe Generale analyst Christophe Cherblanc reiterated a Sell rating and a $170 price target on Netflix (NASDAQ:NFLX) in a note to investors.

Cherblanc said the rating belies "belies a paradoxical 180° change in our assessment."

"Based on a 10-year-view sanity check, we consistently argued that an 'unanchored’ market valuation was embedding wildly optimistic LT assumptions, but we also stressed flawless execution. We believe this has now fully reversed, with the stock price meltdown now embedding a sensible risk/reward, albeit combined with new execution challenges (ability to contain costs in the face of a slowing top-line) and initiatives (launch of an ad-supported tier, crackdown on password-sharing) which are about-turns compared to NFLX’s historical stance," the analyst wrote.

He added that the gap between the firm's price target and Netflix's share price is at its narrowest in "many years," but they "still project a negative 12m TSR. Sell."

Regarding Netflix's password sharing issues, which it is working to address, Cherblanc explained that the company will need to be careful not to alienate users.

"100m households use shared passwords on a global basis, including >30m in UCAN, i.e. 45% of Netflix’s reported member base. Converting password sharers into true subscribers would come with very high marginal profitability, but the company would have to tread carefully to avoid alienating users (preliminary US surveys indicate 13% potential churn)."

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.