Netflix (NFLX) is taking a beating on Wall Street. Shares of the streaming giant have cratered 52% since reaching record highs in November 2021. So far, 2022 has not aided the slump, with shares down a whopping 45% year-to-date.
“The concern is the the growth outlook,” Dave Heger, Edward Jones senior equity analyst, told Yahoo Finance Live, citing the company’s disappointing subscriber outlook as a catalyst for the sell-off.
In its latest earnings report, Netflix said it expects to add 7 million paying members in the current quarter, short of the 7.82 million consensus analysts anticipated. That would mark a 27% decline from the 9.6 million subscribers Netflix added in the year-ago quarter, which had been an all-time high for quarterly paid net additions.
Still, Heger suggested that now might be a good time for investors to buy the dip.
“The valuation is now looking more attractive than what we saw last year,” the analyst explained. He added that current market levels are providing a “good opportunity to be buying the shares.”
“Certainly there’s been some question of what is the longer-term growth outlook for Netflix, and those expectations have been pulled back quite a bit, [but Netflix remains] a company where we still see opportunity” for worldwide subscriber growth, he continued.
Heger went on to credit the streaming giant’s expanded presence in international markets, in addition to its ability to raise prices to account for “growing content and the growing value of its service” as upside potential for further market penetration and success.
“The valuation is now looking more attractive than what we saw last year…”Dave Heger, Edward Jones Senior Equity Analyst on Netflix
The platform has also pursed M&A in order to compete within the crowded media landscape. Compared to its streaming counterparts, Netflix “has been a little more active on the M&A front,” Heger noted.
“As of late, the company appears to be wanting to add content within the gaming space, and they’ve talked much more about raising its profile in online gaming. That’s a new way to add value to Netflix subscribers and could perhaps help justify the price increases that they have been made over time,” he said.
Overall, more businesses are experimenting with price increases to combat inflationary headwinds.
Despite fears of an impending recession, Heger surmised that Netflix has the capacity to weather any economic storm, as consumers generally cut out-of-home entertainment first.
“At least historically, we’ve seen in the traditional pay TV world that subscribers tend to hold on to at-home entertainment … even in more difficult times,” he concluded.
Alexandra is a Senior Entertainment and Food Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193
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