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Shares of Netflix (NASDAQ:NFLX) are down almost 3% in premarket Monday after a CFRA analyst cut his recommendation to Sell from Hold with a $238 per share price target (down from $245).
The analyst made a downgrade move after NFLX shares rallied about 40% from mid-July lows. He sees NFLX stock underperforming the S&P 500 for the rest of 2022.
The lowered price target also reflects slashed 2022 EPS forecasts. As far as catalysts are concerned, the analyst argues that the new ad-pay subscription plans “may not be visible until 2023.”
“This could renew subscriber growth (from 220.7 million at June 30), which has been flat to lower in 2022. NFLX is guiding 1 million more subscribers in Q3 2022 to a net 221.6 million at quarter end. In Q2 2022, NFLX realized only $103 million in operating cash flow and $13 million in free cash flow. These metrics should improve, but we are confident EBITDA and EPS will be lower in 2022 2H compared to 1H results,” the analyst further argued in a research note.
The underperformance is likely to be fueled by macro headwinds, like inflation and lower discretionary consumer spending, which continue to weigh on the business.
