Editor’s note: This article was updated on Jan. 21 to correct the quarter that Piper Sandler analyst Thomas Champion was referring to.
Yesterday after the bell, Netflix (NASDAQ:NFLX) reported Q4 earnings. With the stock down more than 20%, it’s safe to say that investors were extremely disappointed with what they saw. NFLX stock is now trading in the same price range as in April 2020, effectively wiping out more than a year and a half of gains.
Netflix reported Q4 revenue of $7.71 billion, which was in line with consensus estimates. Furthermore, the streaming giant reported earnings per share (EPS) of $1.33, which beat consensus estimates of 82 cents. These numbers aren’t exactly terrible, so why is NFLX stock down so much?
NFLX Stock Down More Than 20% After Reporting Earnings
The reason for Netflix’s price decline is due to its global paid net subscribers guidance for Q1. Netflix reported that it expects to add 2.5 million subscribers for Q1. The 2.5 million figure missed the estimate of 6.93 million new subscribers by a wide margin.
Netflix stated that rising competition was a major factor for its big Q1 guidance miss. In the streaming industry, Netflix competes with streaming services like HBO Go and Disney’s (NYSE:DIS) Disney+. Netflix added that:
“…competition that has only intensified over the last 24 months as entertainment companies all around the world develop their own streaming offering. While this added competition may be affecting our marginal growth some, we continue to grow in every country and region in which these new streaming alternatives have launched.”
With the massive 20% decline in mind, investors are wondering how the rest of the year will look for Netflix. Let’s dive right in.
NFLX Stock Price Predictions
- Piper Sandler has a price target of $562. Analyst Thomas Champion admitted that Q4 “was a challenging quarter for our NFLX thesis.” However, Champion still believes that the transition from linear TV (LTV) to over-the-top (OTT) TV is still in its early stages. In addition, Champion notes that Netflix’s ventures into gaming and merchandise “have yet to take hold.”
- Pivotal Research has a price target of $550. Analyst Jeffrey Wlodarczak lowered his price target today from $750 after reviewing Netflix’s Q4 results. Furthermore, the analyst also decreased his terminal earnings before interest, taxes, depreciation and amortization (EBITDA) multiple in his discounted cash flow (DCF) model from 18x to 16x to reflect “broad tech weakness that is likely to continue.”
- Stifel has a price target of $500. Analyst Scott Devitt lowered his price target from $660 due to the low Q1 subscriber guidance and “uncertainty around when/if acquisition growth will return to pre-pandemic levels.” However, Devitt maintained his buy rating on NFLX stock due to Netflix’s strong market share and content-spend leverage opportunities.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
