Citigroup analyst Jason Bazinet has downgraded Netflix from “buy” to “neutral,” predicting slowing revenue growth for the streaming giant, along with an increased content bill following the settlement of two major Hollywood guild strikes.
Netflix shares had some early-morning turbulence on the Nasdaq, but have remained largely flat and stable Tuesday.
Bazinet predicted Netflix’s content spending over the next two years, widely projected by analyst consensus to be around $18 billion, will be more in the neighborhood of $20.4 billion, with the streaming giant paying a premium following strike settlements with Hollywood writers and actors.
Citigroup’s prediction seems in conflict with a report from earlier this week suggesting that Netflix is buying and producing fewer shows right now.
As far as revenue growth, Netflix reported $32.743 billion, a 4.03% increase, in sales for the 12 months ending September 30. In 2022, Netflix reported revenue of $31.616 billion, a 6.46% increase from 2021.
Netflix is expected to report full earnings for fourth-quarter 2023 on January 23.
“Netflix is a well-run company that has executed remarkably well in a highly competitive market,” Bazinet wrote. “But the equity market has responded to this with a material re-rating in Netflix’s stock over the past few years. And, the sell side expects a fairly robust set of financial results across many key financial metrics over the next two years. For our part, we see a handful of small risks — lower revenues, higher content costs, and potential M&A — that, to us, suggest the risk-reward is now more balanced. As such, we are moving to the sidelines.”
