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For Netflix, a mild deterioration in the consumer economy is a potential blessing in disguise.
To start with, the less money people have, the more likely they are to stay home, where movie-streaming became such a popular form of entertainment during the pandemic.
Then there’s the impact on competitors who have been striving to make inroads into Netflix’s lead. Having plowed big money into streaming services in recent years, the likes of Walt Disney and Paramount Global are now making cuts in the area, deterred by the tougher conditions.
Streaming viewership “should pick up nicely” as people stop going out if the economy slips into a recession later this year, said Matthew Maley, chief market strategist at Miller Tabak. And Netflix should “definitely be a beneficiary of the fact that their competition is focusing more on profitability.”
That view is gaining traction on Wall Street. UBS Group AG analyst John Hodulik upgraded the stock to buy last month, saying the sharp change in the priorities of rivals will drive upside to subscription and pricing power in the coming years while “also keeping a lid on content costs.”
In general, analysts have been turning more positive on Netflix. About 54 percent of those tracked by Bloomberg have a buy or equivalent rating, the highest percentage in about a year. That’s even though streaming services tend to be one of the first things consumers cut back on during an economic downturn.
Having underperformed rivals so far this year, the stock could certainly use a boost. It’s been weighed down in part by Netflix’s crackdown on password-sharing in some regions. That follows a rollercoaster 2022 in which it sank to a near five-year low before rallying sharply.– Bloomberg
Online Reporter