Benchmark reiterated its sell rating on Netflix Inc. stock NFLX on Tuesday, and said it remains cautious even after a Sunday report from Bloomberg that the streaming service has gained about 1 million active users of its ad-supported offering after two months on the market. “Advertising initiatives and the nettlesome password sharing crackdown should be ARM (average revenue per member) accretive but in Benchmark’s view largely position the stock to offset SVOD (streaming video on demand) competitive pressure,” analyst Matthew Harrigan wrote in a note to clients. While Benchmark is expecting the ad alternative to become a significant member share component, the company is operating in the same difficult streaming market condition as peers, although its operating margins benefit from maturity, compared with newer entrants. The analyst is sticking with his $250 price target, based on an S&P 500 linked discounted cash flow valuation through 2027, he wrote, although running the forecast through 2033 raises fair value to $284. The stock closed Monday at $305.13. But Gen Z preference for short form content like TikTok versus traditional linear streaming content is another competitive headwind, he said. Netflix said Monday it plans to launch about 40 more videogames over the rest of 2023, in addition to 70 in development with partners and 16 being developed by its in-house studio. The stock has fallen 19% in the last 12 months, while the S&P 500 SPX has fallen 11%.
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