Netflix Is Now The Worst-Performing Stock In The S&P 500 As Shares Plunges Over 60% In 2022

Topline

Shares of streaming giant Netflix tanked over 6% to kick off the week—adding to already steep losses so far this year—after yet another Wall Street analyst grew more cautious about the company’s business prospects and warned that the stock could struggle for the rest of the year.

Key Facts

Despite a rebound in recent weeks, Netflix’s stock was one of the worst-performing stocks in the S&P 500 on Monday, falling more than 6% to just under $226 per share.

After realizing gains of more than 40% since hitting a low point in mid-July, Netflix’s stock is likely to “underperform” the rest of the market through the end of 2022, according to Kenneth Leon, Research Director at CFRA Research.

He lowered his recommendation on the stock from a “hold” to a “sell” rating in a recent note to clients, slashing his price target by $7 to $238 per share, which was slightly lower than Friday’s closing levels.

“The key catalyst for Netflix—introducing new ad-pay subscription plans—may not be visible until 2023,” Leon points out, though he adds it could potentially help revive flat to lower subscriber growth so far this year.

While Netflix struggled with low operating and free cash flow in the most recent quarter, those metrics should improve, the CFRA analyst predicts, though ongoing challenges to the business include “inflation and lower discretionary consumer spending.”

The stock has lost more than 60% this year, with analysts growing more bearish in the past few months over the company’s slowing subscriber growth and as it faces increased competition from rival streaming services.

Surprising Fact:

Of the nearly 50 Wall Street analysts covering Netflix shares, just under a third still have “buy” ratings on the stock—less than half the amount of nearly a year ago, according to FactSet. In terms of Netflix share ownership and trading activity over the last six months, hedge funds have been net-buyers of the stock, though most other groups have been selling shares. Investment advisers and private wealth managers have been net-sellers, while mutual funds in particular have been dumping shares at by far the fastest clip, FactSet data shows.

Key Background:

Netflix was among 2020 pandemic stock darlings jumping nearly 70% that year as stay-at-home measures boosted growth. 2022 has been a different story as investors pull back, but Netflix has still been one of the best-performing stocks in the S&P 500 as the market rebounded from its low point on June 16. Shares of the streaming giant have jumped roughly 30% since then, compared to the benchmark index’s nearly 15% gain. Netflix’s stock has started to decline again in recent sessions, however, as the recent market rally starts to fizzle out. The stock market widely fell on Monday—led by a decline in tech stocks—amid increased concerns about Federal Reserve rate hikes and warnings from Wall Street analysts that the recent bear market rally is “grinding to a halt.”

Further Reading:

Ford, Tesla And Netflix Are Among The Best-Performing Stocks During This Summer’s Massive Rally (Forbes)

Dow Falls 600 Points As Experts Warn Bear Market Rally Is ‘Grinding To A Halt’ (Forbes)

Bank Of America Warns Of ‘Textbook’ Bear Market Rally, Predicting New Lows For Stocks (Forbes)

Tech Stocks Are Leading Markets Higher Again, But Analysts Split On Whether Rebound Will Continue (Forbes)