Despite the discharge of well-received monetary figures from the video streaming large, Michael Nathanson argued Friday that Netflix (NASDAQ:NFLX) stock is overvalued and he sees “attractive” alternatives elsewhere, together with Meta (NASDAQ:META) and Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL).
In an interview with CNBC, the SVB MoffettNathanson founding companion and senior analysis analyst mentioned that “the narrative is getting significantly better” for the streaming sector on the whole, as corporations have turn out to be “extra rational about spending.” However, he added that traders are “hiding in” Netflix, despite the fact that there are extra engaging investments amongst some of its tech rivals.
“I believe the stock is ahead of itself,” Nathanson mentioned of NFLX, noting that the agency’s outlook indicated that its latest quarterly outcomes had been a “pull ahead” of demand somewhat than sustained indicators of development. “I simply suppose it is run too quick, too far and we predict there are higher alternatives different locations.”
Specifically, Nathanson pointed to Meta (META) and Alphabet (GOOG) (GOOGL), citing “actually attractive entry factors here.”
“I do know individuals are nervous in regards to the advert numbers, however the shares have fallen a lot and I believe individuals have taken the issues in 2022 and thought they had been structural and they had been cyclical to me,” he mentioned.
On NFLX, Nathanson acknowledged that the streaming service’s 2023 outlook seems promising in phrases of money stream and working margin and he predicted that the subsequent six months will present higher “risk-reward.”
Netflix (NFLX) rose greater than 6% in Friday’s intraday buying and selling following the discharge of its This fall earnings report. This included steering for 2023 income to speed up, working margin to return in between 21% to 22% and free money stream to be ~$3B.
The streaming large mentioned it added 7.7M subscribers in This fall, which was properly above firm’s expectations of 4.5M and consensus of 4.1M. That introduced its whole to 230.8M subscribers worldwide.
Looking on the previous 12 months, NFLX has plunged about 35%, whereas GOOGL has declined 28% and META has retreated 57%. In Friday’s intraday motion, META was up 1.6% and GOOGL superior 4.8% amid information the Google mother or father was reducing 12,000 jobs.
Looking at how some of NFLX’s friends reacted in intraday motion: Walt Disney (DIS) +1.4%, Roku (ROKU) +3.4%, Warner Bros Discovery (WBD) +1.7%, Paramount Global (PARA) +1.2%, fuboTV (FUBO) +4.6%.
For extra on Netflix valuation, see why Seeking Alpha contributor Ahan Vashi says that “At ~50x ahead P/FCF and 2023 income development of ~10-15%, Netflix is grossly overvalued.”