What Wall Street Says About Netflix’s Great Longing

Wall Street’s patience with Netflix (NFLX) appears to be thin.

Shares of Netflix slipped into the red at the opening bell on Friday as Wall Street melted a weak second quarter earnings report. The streaming giant’s third-quarter revenue outlook did not meet expectations, and management did little to convince investors of slowing growth and engagement trends.

Analysts said the earnings report did little to ease concerns about Netflix’s growth.

« Right now it’s in no-man’s land, » Jessica Reif Ehrlich, senior media analyst at Bank of America Global Securities, told Yahoo Finance about the company. « There’s just not enough here to move the stock in any direction. There was nothing for the bulls, but there was certainly something for the bears. »

One potential catalyst for the stock is an acquisition, Ehrlich told Yahoo Finance. Netflix pulled out of bidding war with Paramount Skydance (PSKY) over Warner Bros. Discovery in February. Investors may see the new deal, which brings a fresh batch of IP through the door, as a strong move for the streamer.

Ehrlich named NBCUniversal as a possibility acquisition target.

In June, Comcast (CMCSA) said the company plans to spin off NBCU into a separate public company that includes the Universal Pictures movie studio, the Peacock streaming platform and the theme parks. The new venture is « something that would fit (Netflix) and probably help them grow given the IP that’s involved, » Ehrlich said.

Including Friday’s selloff, Netflix shares have lost about 46% over the past 12 months as earnings reports and new offerings have failed to flip the script for investors looking for a growth story.

Thursday’s announcement that Netflix will move to publishing its « Watch we Watched » report, which contains detailed viewership statistics, just once a year also spooked investors, sparking fears that the company is becoming less transparent. how well its platform actually engages and retains users. Until now, the company had published the report every six months.

Until Netflix finds a spark for growth, the company will struggle to prove to investors it can regain momentum, LightShed Partners TMT analyst Rich Greenfield said on CNBC Friday morning.

« This is basically investors believing that Netflix has gone back to its former growth, » Greenfield said. «  »Investor currently has no patience for this company. »

Analysts at William Blair noted that there is room for upside. While « sustainable growth has become questionable historically, » the analysts wrote Friday, « Netflix has been able to sustain price increases while maintaining industry-leading retention. »

The company should also be able to take advantage of several headwinds, including monetization of live sports, paid sharing plans and a scalable advertising business, the analysts wrote.

« The company believes it has the right levers to sustain double-digit growth and does not feel compelled to seek a re-acceleration growth lever, » they said. « While it may require patience, we believe investors should benefit from picking up shares during the pullback while recognizing that there is no near-term catalyst. »

Jake Conley is a news reporter who covers US equities for Yahoo Finance. Follow him on X at @byjakeconley or email him at jake.conley@yahooinc.com.

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