Netflix (NFLX) PT Lowered to $625 at Barclays, 'Bad quarter but de-risks rest of '21
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Barclays analyst Kannan Venkateshwar lowered the price target on Netflix (NASDAQ: NFLX) to $625.00 (from $650.00) while maintaining a Overweight rating.
The analyst comments "We are now modeling 22.5mm net additions in '21, which when averaged across '20 and '21 implies 29.5mm net adds per year, a slightly higher pace than the ~28mm the company added in '18 and '19. Laterally, the impact of content mix on Netflix results also highlights the growth and balance challenges faced by new entrants. ...but de-risks the stock for the rest of the year: This performance comes at a tricky time for the stock as the narrative is starting to shift from subscriber growth towards margin and free cash flow growth as well as capital returns. This is likely to bring in a different set of investors looking at a broader set of KPIs for valuation, even as growth-oriented investors start to change their valuation framework. This transition could result in some volatility but commencement of a buyback program should help bridge this transition to some extent. This is why we find the company's implicit deleveraging guidance to be sub optimal from a balance sheet perspective and believe the company should work towards a leverage target rather than an absolute debt amount as its goal post. Overall, while these results are obviously disappointing, in some ways, this has likely helped de-risk the stock for the rest of the year, specially making the set-up into the second half particularly attractive due to easier comps and a strong content slate. Therefore, we continue to remain OW."
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