To The Moon

Netflix(NASDAQ:NFLX) stock is tumbling today after Goldman Sachslowered its ratingon NFLX to “sell” from “neutral.” The firm also slashed its price target on the shares to $186 from $265.

Goldman cut its estimates for Netflix to reflect a deterioration in the firm’s macro outlook, analyst Eric Sheridan explained. More specifically, a consumer recession could put downward pressure on the demand for Netflix’s offerings, Sheridan warned. Also likely to hurt the company’s financial results going forward is increased competition, the analyst stated.

The Consequences of a Recession, Tougher Competition

A consumer recession would have negative ramifications for Netflix’s gross adds and churn, margin expansion and content spending, according to Goldman. The firm “modestly” reduced its estimates of Netflix’s paid subscriber base.

On the other hand, Goldman raised its estimates of Netflix’s average revenue per user in the U.S. for 2024 and subsequent years. The firm took the latter step to account for Netflix’s likely introduction of an ad-supported offering and a coming crackdown by the company on password sharing.

Other Views on NFLX Stock

InvestorPlacecolumnist Vandita Jadeja noted the company’ssubscriber basedeclined last year and investors were unhappy with its first-quarter results. She warned these trends will keep hurting NFLX stock for the rest of 2022. In the May 28 column, Jadeja told investors to stay away from the shares for the time being.

Alsovery bearishon Netflix was anotherInvestorPlacecontributor, Patrick Sanders. Calling the company’s first-quarter results “horrendous,” the analyst contended in his May 26 article that “the days of Netflix being a leading streaming stock are probably over.” Sanders believes the company is being significantly hurt by stepped-up competition. Like Jadeja, Sanders said he’s avoiding NFLX stock for now.

The streaming company’s shares have tumbled almost 70% so far this year.

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