Netflix has had to deal with increased competition and slowing content growth this year, factors that Wells Fargo analyst Steven Cahall said weighed on its shares.
Netflix Inc. shares are on pace to shed nearly half their value over the course of 2022, and Wells Fargo analyst Steven Cahall said “the pieces were there” for that weak performance. But he has a rosier outlook for 2023, which he said will bring “more ways to win” for the company.
Cahall upgraded Netflix’s NFLX, +3.19% stock to overweight from equal weight Friday, writing that the company has opportunities to outperform on its key performance indicators in the new year. “Content is clearly improving,” he noted, and Netflix is cracking down on password sharing and has introduced a cheaper, ad-supported tier.
Cahall further noted that “the U.S. entertainment scatter market is close to $10 billion annually and offers a low-hanging fruit to [Netflix], especially as cord cutting increases.” Scatter ads refer to ads purchased closer to the time of air, rather than in advance. Netflix shares were trading just above $327 in midday trading Friday, up 5.6% and leading S&P 500 SPX, -0.68% gainers. They were headed for their highest close since April 19, when they finished at $348.61, according to Dow Jones Market Data.
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