Analysts are getting worried about Netflix ahead of earnings next week

Published Thu, Jan 13 20228:26 AM ESTUpdated Thu, Jan 13 202211:18 AM EST

With Netflix set to report earnings in a week, analysts are worried about slowing growth despite blockbuster content in the fourth quarter. "Netflix is a high-quality leader that can still grow, but low-hanging fruit has been picked, competition is coming, the streaming wars will drive up content costs, and valuation is not yet appealing for non-growth investors, leaving open a negative bias for sentiment," Credit Suisse's Douglas Mitchelson said in a note Thursday. Credit Suisse maintained an outperform rating on Netflix and $740 price target on the stock. Releases of movies like "Don't Look Up" and TV shows like "Emily in Paris," as well as the continued success of international phenomenon "Squid Game," were bright spots for Netflix's fourth quarter, analysts said. But with entrants like NBCUniversal's Peacock and ViacomCBS's Paramount+, the competition for subscribers is getting crowded. "With 4Q21 widely billed as Netflix's biggest content quarter ever, we would expect investors to recalibrate their long-term outlook based on whether or not this large content slate drove strong growth," Mitchelson said. Credit Suisse also said it has a "complete lack of visibility" into net subscriber additions in the fourth quarter, as its app download data analysis does not tell a clear story. Meanwhile, MoffettNathanson trimmed its price target on Netflix by $5 to $460, or 14% downside from Wednesday's closing price. The firm has a neutral rating on the stock. "What if the strongest content slate in Netflix's history doesn't translate into a massive beat on subscriber growth?" MoffettNathanson's Michael Nathanson said in a note Thursday. "Based on our reading of multiple data points, it feels to us that Netflix's U.S. business is being impacted by ... the increasingly aggressive streaming strategies of legacy media companies." Netflix shares are down more than 10% in 2022 amid a sell-off in technology names. The stock returned 11% in 2021, underperforming the S & P 500's nearly 27% gain. Netflix is set to report earnings on Jan. 20. Disclosure: NBCUniversal is the parent company of CNBC. —CNBC's Michael Bloom contributed reporting.

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With Netflix set to report earnings in a week, analysts are worried about slowing growth despite blockbuster content in the fourth quarter.