Netflix will kick off earnings season for technology stocks this week. Expectations might need to be held in check for now as the company balances its growth and margin ambitions.
Netflix might not deliver the benefits from its crackdown on password sharing and the introduction of advertising-supported streaming immediately. That’s the message from UBS analyst John Hodulik, who lowered his target price on the stock to $500 from $525 in a research note on Monday, although he kept a Buy rating on the stock.
Netflix shares were down 0.1% at $355.35 in premarket trading on Monday. The stock is up 21% this year so far but has sunk sharply from levels of more than $450 in July. Investors were disappointed by cautious commentary on margins and subscriber growth last month. UBS’s Hodulik is expecting Netflix to report on Wednesday that it added around six million subscribers in the third quarter and forecast stronger growth for the fourth quarter. However, he warned margin expansion could be moderate.
“For 3Q , we expect flat ARPU … given limited price increases but expect growth to accelerate next year as accretion from paid sharing builds & new price ups are likely implemented,” Hodulik wrote.Netflix last raised the prices of its advertising-free service in January 2022 but The Wall Street Journal reported earlier this month that it intends to increase the price sometime following the end of the Hollywood actors’ strike.
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