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Harrigan remained cautious on Netflix in the wake of yesterday’s near 9% stock sell-off in reaction to a Digiday article that indicated non-accomplishment of viewership guarantees to advertisers and permitting ad buyers to withdraw money for ads that have not yet run or rolling commitments into 2023.
Benchmark’s digital media team feels the advertising launch was rushed with unrealistic, above-peer pricing and certainly limited testing, not to mention a limited immediate AVOD user base.
The rapid launch was an apparent reaction to gathering AVOD market momentum, issues with global member growth, and even NFLX’s below-peer churn despite current high-profile shows.
The Digiday article indicated that Netflix delivered only 80% of the guaranteed audience, with clients only paying for actual eyeballs.
Harrigan still expects Netflix to generate significant global growth. However, the broader gamut of programming, including sports supporting The Disney Bundle and Amazon Prime, is a disadvantage for Netflix despite its entrenched position as the scripted content volume leader.
Antenna estimates that the 3Q22 monthly churn at Netflix increased to 3.5% from 3.4% in 2Q22 and a meager 2.0% in Covid-stricken 2021.
The price target change reflected largely off pushing the time frame to 2023, allowing an S&P 500 relative discounted cash flow valuation through 2027 versus 2025 formerly.
Price Action: NFLX shares traded higher by 0.70% at $292.45 on the last check Friday.
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