Netflix, Inc. (NFLX) saw a decline in value over the past year, and the stock significantly underperformed the S&P 500. Despite rising on the WhaleWisdom Heatmap to nine, hedge funds have been actively selling shares. Netflix’s stock declined by over 70% as of September 8, 2022, compared to the S&P 500’s less severe loss of around 12%.
Netflix is an entertainment services company that provides streaming content. Netflix offers on-demand subscriptions to allow viewers to see many of their favorite television (TV) shows, movies, and documentaries and play mobile games. The company produces and co-produces Netflix Original content in addition to acquiring rights for film and tv titles from other production studios. Subscribers to the platform may watch content through any device connected to the internet, such as smart TVs, smartphones, and laptop computers. Netflix is one of the largest streaming providers globally, though its origin began with DVD rentals by mail, a service the company continues to offer. While Netflix saw a boost in subscribers at the coronavirus pandemic, it has since seen losses due to various factors, including subscribers closing accounts, ending its operations in Russia, and competing streaming services. The company also continues to lose revenue due to customers’ password sharing, a practice it’s taking action to curb.
Hedge Funds and Institutions Sell
Hedge Funds adjusted their portfolios in the second quarter, and the aggregate 13F shares held decreased to approximately $70.8 million from $73.4 million, a slide of about 3.6%. Overall, 50 hedge funds created new positions, 139 added, 114 exited, and 99 reduced their stakes. Institutions lowered their holdings by about 3.3% to $333.7 million from 345.2 million.
Encouraging Multi-year Estimates
Analysts expect to see earnings rise through 2023, with year-over-year increases in growth that could bring earnings to $10.93 per share by December 2023, up from a projected $10.30 for 2022. Revenue predictions are also favorable, with revenue expected to increase to about $34.2 billion by 2023, up from an estimated $31.7 billion. Netflix’s 13F metrics between 2005 and 2022 reflect the company’s fluctuating stock price amid market volatility and recent hits to its subscriber base.
Mixed Responses from Analysts
Analyst Andrew Uerkwitz of Jefferies Group LLC lowered the firm’s price target on Netflix to $230 from $243 and kept a Hold rating on shares. Jeffries shared cautious optimism for the next quarter if strategically ad-supported content can help boost subscribers higher and the company can reduce losses from customer password-sharing. Tim Nollen of Macquarie Bank enthusiastically raised the firm’s price target on Netflix to $230 from $170 and upgraded the company to a Neutral rating, noting the company’s long-term potential.
Optimistic Long-term Outlook
After a disappointing start to the year, Netflix is likely to see a rebound, as the long-term trends for the company are favorable. While hedge funds were selling and growth has declined this year, analysts have shared optimistic earnings and revenue estimates for 2022 and 2023. Netflix is working to recover lost subscriber fees and continues to utilize viewership data trends to improve its content and boost revenue. The stock should recover over time as demand for the company’s entertainment services continues.