NFLX stock forecast: why it’s definitely one to watch

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The Netflix stock forecast for 2022 comes after a disappointing start and finish to 2021

Like a good TV series with a season-ending cliffhanger, the Netflix stock forecast improved as 2021 went on, but then a sudden plot twist. It started by falling two million short of the expected six million new subscribers and beat third quarter expectations by 500,000, with 4.4 million newcomers worldwide. Then came the fourth quarter, finishing at 222 million paid memberships.

A closer look reveals it was 8.3 million paid net adds, missing the company’s expectations by 200,000 — or 0.1% of the overall total subscribers’ list. Analysts point to increased content and marketing investments by Disney, Amazon and Apple.

“Competition is growing,” analyst Santosh Rao of Manhattan Venture Partners told Yahoo. “And they may not be able to compete, the good old days may be gone. Now, they will really have to grind it out, compete neck-to-neck in terms of quality of content”.

More than 90% of new paid subscriptions in 2021 came from outside US and Canada, including 3.5 million in Europe, Middle East and Africa and 2.6 million in Asia-Pacific. The former exceeded quarterly revenue of $2.5bn for the first time. The latter was driven by gains in India and Japan.

Despite Netflix admitting that the pandemic had caused “lumpiness” in membership growth, there were some encouraging numbers for the NFLX stock forecast. Revenue in this latest quarter rose by 16% year-on-year to hit $7.7bn. It also achieved full-year revenue of $30bn, up 19% over 2020, and operating income rose 35%. Earnings per share for the fourth quarter were $1.33, substantially higher than the $0.82 in a Refinitiv survey.

NFLX also boasted that 2021 made it the most Emmy-winning and nominated in TV and the most-Oscar winning and nominated movie studio. In a statement, the company said: 

“Even in a world of uncertainty and increasing competition, we’re optimistic about our long-term growth prospects as streaming supplants linear entertainment around the world".

In the company’s 20 January analyst interview, CFO Spencer Neumann said:

"Overall, we're quite pleased with how our titles performed. We had big viewing. We started the quarter with Squid Game becoming a global phenomenon, and we ended the quarter in December with big TV series like the finale of La Casa de Papel, a big returning show in The Witcher, our two biggest movie releases of all time. So overall, the business was healthy. Retention was strong. Churn was down. Viewing was up”.

The South Korean-import hit, the survival drama Squid Game, became the biggest TV show in Netflix history when it drew the eyeballs of 142 million subscriber households, for at least two minutes, in its first four weeks. The number one programme in 94 countries inspired Saturday Night Live sketches, TikTok clips, memes and Halloween costumes.

“Sometimes you think you’ve got lightning in a bottle and you’re wrong. And sometimes, you think you’ve got a great Korean show that turns out to be lightning in the bottle for the world,” said Ted Sarandos, co-CEO and chief content officer, in the third quarter call with analysts.

What weighs heavily on Netflix stock predictions is the threat posed by an ever-growing number of rivals in the streaming space. Consumers can only stomach so many price increases, especially if they have signed up to multiple services. Before delivering its 2021 year-end results, NFLX hiked fees for US subscribers by $1 for the basic plan to $9.99 and the two-screen standard plan from $13.99 to $15.49.

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Viewers may also chop and change their memberships in line with the platforms that have TV shows and films they want to watch, meaning Netflix is under continuous pressure to deliver content that gets people talking.

Netflix forecast: Game on

The Netflix stock price hit an all-time high close on 29 October at $690.31, 10 days after third quarter results emerged. It started 2022 with a $597.37 close on 3 January. Two weeks later, the full-year results led to somewhat of a crash, from $508.25 to $397.50 — an almost 22% nosedive in a day.

Raymond James analyst Andrew Marok called the slow subscriber growth “a kind of reset in expectations”.

“I think the question will remain, you know, what does normalised demand for Netflix look like as we get past the pandemic?” Marok said.

Netflix had gained a reputation for “Zeitgeist-style content,” Marok said. Though it is not a player in sports or superhero movies, it historically delivers “headline-driving, conversation-driving types of content that people want to be included in those conversations”.  The challenge now is to stay ahead of competitors, because NFLX is “not really the only game in town anymore”.

What next?

Netflix is forecasting a modest 2.5 million net adds in 2022’s first quarter, substantially lower than the four million of a year ago.

Acquisition growth has not returned to pre-Covid levels, owing to what the company calls “Covid overhang” and lingering economic pains felt in Latin America.

The US dollar is outperforming most currencies and Netflix counts 60% of its revenue outside the US. US dollar strength over the second half of 2021 cost $1bn in expected revenue for the company, which does not hedge currency buys. Since much of its expenses are in US dollars, that means a two percentage point negative hit to the 2022 margin.

Said the letter to shareholders:

“There is no change to our goal of steadily growing our operating margin at an average increase of three percentage points per year over any few year period".

NFLX price history

Date Close Change Change(%) Open High Low
Aug 12, 2022 247.82 4.09 1.68% 243.73 249.10 241.59
Aug 11, 2022 242.43 -2.45 -1.00% 244.88 251.22 241.23
Aug 10, 2022 244.74 16.40 7.18% 228.34 245.44 228.24
Aug 9, 2022 229.29 -3.46 -1.49% 232.75 233.72 224.42
Aug 8, 2022 233.75 6.19 2.72% 227.56 241.59 226.16
Aug 5, 2022 226.40 -2.15 -0.94% 228.55 230.21 222.68
Aug 4, 2022 229.74 3.99 1.77% 225.75 231.74 224.75
Aug 3, 2022 224.84 4.51 2.05% 220.33 227.81 219.75
Aug 2, 2022 220.55 -3.10 -1.39% 223.65 227.89 219.76
Aug 1, 2022 224.80 0.35 0.16% 224.45 228.08 220.74
Jul 29, 2022 224.47 -2.28 -1.01% 226.75 230.34 222.08
Jul 28, 2022 226.27 2.90 1.30% 223.37 227.79 219.41
Jul 27, 2022 225.04 8.68 4.01% 216.36 227.41 214.33
Jul 26, 2022 215.45 -1.61 -0.74% 217.06 219.07 211.41
Jul 25, 2022 216.76 -3.19 -1.45% 219.95 224.94 216.13
Jul 22, 2022 219.75 -0.71 -0.32% 220.46 229.06 218.17
Jul 21, 2022 221.35 7.05 3.29% 214.30 224.01 211.26
Jul 20, 2022 215.00 -1.09 -0.50% 216.09 217.33 199.91
Jul 19, 2022 217.17 24.89 12.94% 192.28 223.50 188.19
Jul 18, 2022 190.97 -0.15 -0.08% 191.12 199.38 189.56

FAQs

According to CNN Business, the Netflix stock forecast for 2022 is still looking rather upbeat. The median view of 39 analysts indicates a $575 target over the next 12 months. The high-end estimate predicts a ceiling of $751. However, a low-end forecast of $342 has been made too.

Twenty of the 47 analysts polled say that Netflix stock is a buy, while 16 say hold. Six expect it to outperform the wider market. Two analysts believes NFLX will underperform, and three say sell.

Understandably, there is a lot of enthusiasm surrounding the Netflix stock forecast for 2025, and this question in particular: Will Netflix stock go up? 

Of course, it is difficult to know what lies ahead for NFLX. Although the streaming giant was a first mover in its space, competition is starting to heat up and traditional broadcast networks and tech companies are now beginning to spend big bucks on their own offerings.

Currency.com offers Netflix shares in tokenised form, allowing you to gain exposure to the share price without owning the underlying stock. This gives you the opportunity to enter into short positions if you believe prices will fall.

The views expressed in this article are those of the writer and do not represent trading advice. Always remember your decision to trade depends on your attitude to risk, your expertise in this market, the spread of your investment portfolio and how comfortable you feel about losing money.

Trade Netflix - NFLX stock price

Netflix
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247.82
Low: 242.08
High: 249.01

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