![]() This process has been around for over a century and has become increasingly popular in recent years. Simply put, a stock split is when a company increases the number of shares they have outstanding while simultaneously decreasing their share price. "There's a lot more to making money than just adding subscribers everywhere," Rao said, warning investors against a "short-sighted" focus on just growth.Īlexandra is a Senior Entertainment and Food Reporter at Yahoo Finance.Do you ever wonder how companies like Apple, Tesla, or Amazon manage to keep their share prices relatively affordable despite their massive growth? Well, one answer lies in a financial maneuver called a stock split.īut why do companies choose to split their stock? Is it just a numbers game, or is there more to it than meets the eye? And what impact does a stock split have on investors? All great questions. Rao, meanwhile, argued that it's more about the "stickiness" of the subscriber rather than the actual number. Still, Schindler (who has an Underperform rating on the stock) said investors want to see the platform "rationalize its expense levels to become generators based on a new normal of growth." "Can Netflix rejigger its business to be profitable and very cashflow positive? That remains to be seen," Schindler continued, adding that it would be difficult to predict the impact on Netflix's bottom line if the company was to drastically cut its $18 billion annual content spend. He explained that due to the abrupt shift it will be very difficult for the platform to "switch its mindset" and transition from a high-growth company to a profit-maximizing one. Netflix "seemed completely caught off guard" by the sudden drop in users, Nat Schindler, Bank of America senior analyst, told Yahoo Finance, adding that the platform "hit that wall really fast at a really high rate of speed, and just suddenly stopped growing." The plummet in net subscriber additions seems to have surprised even Netflix, especially after the platform enjoyed an intense pull-forward effect during the pandemic that brought in 37 million subscribers in 2020. The company shed 200,000 paying subscribers in the first quarter and said it expects to lose another 2 million in the current quarter. Netflix shares have been under pressure since the company announced an unexpected first-quarter subscriber loss and weak second-quarter guidance in April. I'm sure it will do it again." Netflix 'hit that wall really fast' "There's going to be some discipline involved - you can't just throw out money and get content," the analyst stated, adding that content "has to be optimized, and it has to be good. Rao stressed that the streaming platform's biggest challenge will be "putting all of the pieces in place" and appropriately managing expectations. "But if Netflix can incrementally show some improvements, I think they will get the benefit of the doubt at this point." ![]() "All of that limits the upside," he said. "There's a lot of work in progress it's a good investment - a solid company that's still cashflow positive with the set-up and infrastructure to come back," Rao said. ![]() Rao added that Netflix, which recently green-lit a second season of "Squid Game," has a "slate of winning programs" and emphasized that investors should adopt a buy-and-hold approach. "It's going to take some time for people to realize that, at the end of the day, this is just a solid company with amazing resources to rebuild," he said, explaining that the platform's upcoming ad-supported offering and crackdown on password sharing should help "expand its revenue source." ![]() Santosh Rao, head of research at Manhattan Venture Partners, told Yahoo Finance that "the worst is priced in" and advised investors to be patient and focus on the next several quarters. Sheridan slashed his price target to $186 (down from $265), citing "concerns around the impact of a consumer recession as well as heightened levels of competition on demand trends." On Friday, Goldman Sachs ( GS) analyst Eric Sheridan downgraded shares to Sell from Neutral. The analyst admitted to "prematurely" upgrading the stock to Hold following the company's Q4 earnings report. The bears are also out in force: On Tuesday, Benchmark analyst Matthew Harrigan reverted back to a Sell rating on the stock and issued a new price target of $157 a share.
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