Why Netflix stock flopped again today

The company is hit with a tidal wave of analyst downgrades and price target cuts as investors continue to bail.

| More on:
A group of young people sit together watching a television very intently with wide-mouthed, awed expressions while one holds a large bowl of popcorn with a bottle of beer in the foreground.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

One day after experiencing one of the worst trading sessions in its history, Netflix (NASDAQ: NFLX) stock took another fall on Thursday.

At least this one wasn't as bad; the streaming video bellwether's shares closed "only" 3.5% lower. Some of this can be attributed to lingering pessimism following the company's ugly first-quarter results, but it was also due to a top investor bailing on the stock, and a raft of analyst price-target cuts and downgrades.

So what

Like the ending of a mediocre film, we could have guessed the reaction of many analysts to Netflix's first-quarter earnings report (in which it shockingly revealed a 200,000-count loss in streaming clients, with far more departures anticipated to come). The price target cuts and recommendation downgrades came thick and fast, even from longtime bulls.

As of late Thursday afternoon, among the platoon of recommendation choppers were JPMorgan Chase, Stifel, Oppenheimer, and Edward Jones. The Netflix analysts at all these companies changed their views on the stock to the equivalent of neutral from their former buy.

There were outliers, but they were very far and precious few between. One was Needham's Laura Martin, who went in the opposite direction. She lifted her recommendation on the fallen streaming king to hold (neutral) from the preceding underperform (sell).

Martin thinks a new company strategy could be one fix for what ails it. In a research note, she pointed out that "for the first time, the CEO stated [Netflix] will introduce a low-priced [advertising-supported] tier over the next 18-36 months."

Now what

The occasional positive adjustment isn't keeping people from selling out of the stock. One prominent seller was Pershing Square's Bill Ackman. On Thursday, it was reported that the high-profile hedge fund manager completely vacated his stake in Netflix, booking a queasy $400 million or so loss as he did so. According to media reports, Ackman had purchased around 3.1 million shares earlier this year. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Eric Volkman has no position in any of the stocks mentioned. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended Netflix. The Motley Fool Australia has recommended Netflix. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 

More on International Stock News

A male investor sits at his desk looking at his laptop screen holding his hand to his chin pondering whether to buy Macquarie shares
International Stock News

The US election is done and dusted. Is now the time to buy the ASX NDQ ETF?

US stocks continue to march higher this week.

Read more »

A financial expert or broker looks worried as he checks out a graph showing market volatility.
International Stock News

Why is everyone talking about the VIX Index today?

Fear or greed: Which investor sentiment will prevail today?

Read more »

A young kid with dark glasses rocks out with a guitar.
International Stock News

Why Nvidia stock rallied to a new all-time high on Wednesday

The changing of the guard bodes well for the artificial intelligence (AI) chip specialist.

Read more »

A handsome smiling man sits in the front seat of an electric vehicle with his hands on the wheel feeling pleased that the Carsales share price is going up and the company will shortly pay its biggest dividend ever
International Stock News

Why Tesla stock just skyrocketed

Why is Donald Trump's election victory powering explosive gains for Tesla stock?

Read more »

Man holding up betting slip and cheering along with two friends in front of TV
International Stock News

Elon Musk's big gamble: Will Tesla stock plunge if Kamala Harris wins the election?

The Tesla CEO has been an outspoken advocate for GOP presidential candidate Donald Trump. Will it backfire?

Read more »

Four investors stand in a line holding cash fanned in their hands with thoughtful looks on their faces.
Economy

Up 20% this year. Does the S&P 500 Index have more in the tank for 2024?

Will US stocks hold up after the election?

Read more »

two young boys dressed in business suits and wearing spectacles look at each other in rapture with wide open mouths and holding large fans of banknotes with other banknotes, coins and a piggybank on the table in front of them and a bag of cash at the side.
International Stock News

2 magnificent S&P 500 dividend stocks down 27% to 51% to buy and hold forever

These stocks hold potential to act as growth and income plays.

Read more »

A young female investor with brown curly hair and wearing a yellow top and glasses sits at her desk using her calculator to work out how much her ASX dividend shares will pay this year
International Stock News

One Wall Street analyst thinks this emerging Artificial Intelligence stock could rise 60% in the next year

SoundHound AI is on the doorstep of a big year.

Read more »