Netflix Is In A ‘Show-Me’ Period Ahead Of Earnings, Seaport Says Amid Price Target Cut

Seaport Research lowered its Netflix price target to $90 from $102 but maintained a ‘Buy’ rating.

• Seaport said Netflix shares appear oversold relative to the company’s long-term growth prospects.
• The firm’s price target cut adds to a series of reductions by analysts covering Netflix this month.
• Last week, Wedbush lowered its Netflix price target to $90 from $105 while reiterating an ‘Outperform’ rating, citing user engagement as a central concern of bearish investors.

Netflix (NFLX) shares are in a “show-me,” wait-and-see period ahead of the streaming giant’s earnings report after the closing bell on Tuesday, according to Seaport Research analyst David Joyce, who sees room for a recovery despite near-term uncertainty.

NFLX stock fell over 1% in morning trade on Monday, and retail sentiment around the shares on Stocktwits shifted to ‘bearish’ from ‘neutral’ territory over the past day. Chatter remained steady at ‘normal’ levels.

Analysts expect Netflix to report earnings per share (EPS) of $0.82 on revenue of $12.8 billion, as per Koyfin data.

Seaport Sees Long-Term Upside Despite Near-Term Uncertainty

Joyce lowered the price target on Netflix to $90 from $102 and reiterated a ‘Buy’ rating on the shares, according to a note to investors cited by TheFly. 

He said that Netflix shares have been oversold from a long-term growth perspective, but noted that the company is now in a period when investors will want clearer evidence that its growth story can deliver. According to him, this makes the company’s upcoming results and management commentary important catalysts.

Content Leadership Change Puts Engagement In Focus

Netflix announced last Thursday that Bela Bajaria, its current chief content officer, would step down and be succeeded by Peter Rice, a former Disney executive.

Wedbush also lowered its price target on Netflix, cutting it to $90 from $105 while maintaining an ‘Outperform’ rating, according to TheFly. The firm pointed to the leadership change as one of several moves that could help address concerns about user engagement and redirect spending from heavy infrastructure investments toward more focused content spending.

Wedbush identified engagement as the central concern underpinning the bearish case against Netflix. However, it said investors should also focus on advertising revenue, which the firm expects to reach roughly $3 billion by year-end, doubling from the previous year. Wedbush described the leadership change as a positive catalyst.

In a note to investors cited by TheFly, Wedbush cut the price target on Netflix to $90 from $105, and reiterated an ‘Outperform’ rating. It pointed to the leadership shuffle as one of the many changes at the company that should address its engagement issues and shift dollars from heavy infrastructure spending to more focused content spending.

More Price Target Cuts, Layoffs Add To Scrutiny

KeyBanc, Morgan Stanley, Barclays and Huber Research have also lowered their price targets on Netflix this month, adding to the pressure on the stock ahead of earnings.

Netflix has also reportedly laid off around 1,000 employees this week. In a company-wide email, co-CEOs Greg Peters and Ted Sarandos said the cuts reflected the company’s need to be more “disciplined” with its people and resources.

The executives added that Netflix remained on track to meet its full-year forecast and would continue to “invest aggressively in high-impact areas.”

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