Why Netflix Was a Star Stock Today
What happened
Many investors have become notably more bearish on Netflix (NASDAQ: NFLX) lately, but you wouldn't know that by looking at the stock's performance on Wednesday. It surged nearly 5% higher on the day, thanks to an article in a topfinancial newsoutlet highlighting some potentially beneficial moves it's making, and an analyst recommendation upgrade.
So what
The article was published Wednesday morning in the finance world's newspaper of record, The Wall Street Journal. Citing "people familiar with the matter," the report states that Netflix is actively reviewing its operations for areas in which it can cut costs. Among other activities currently being assessed are its real estate holdings and cloud computing expenses.
In the personnel sphere, the article's sources say the company has actively been hiring more junior staff, presumably because such individuals require lower salaries.
All told, Netflix's operating expenses were $23.5 billion in 2021, which was up 15% from the 2020 level. Meanwhile, the streaming video king's subscriber count has been falling lately. The company has already said that it will cut spending on both content and non-content costs.
Netflix has not yet officially commented on the Journal article.
Now what
Meanwhile, Macquarie analyst and longtime Netflix tracker Tim Nollen lifted his recommendation on the stock. He now feels it's worthy of a neutral rating, rather than his previous tag of underperform (sell). He's also lifting his price target substantially, boosting it to $230 per share from the preceding $170.
Nollen is basing this on Netflix's plan to introduce an ad-supported subscription tier. He wrote in a new note that the company could draw $3.6 billion in revenue from this, although that tally shakes down to $1.1 billion when factoring in the almost certain lower subscription prices for such a tier.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix. The Motley Fool has a disclosure policy.
