KEY POINTS

  • Apparently, the streaming video giant is cutting expenses drastically.
  • A veteran analyst is pushing up his recommendation.

What’s going on with Netflix stock

After a bearish start to 2002, Netflix stock surged on Wednesday. Although many investors have lost faith in Netflix (NASDAQ:NFLX), as shown by its stock dropping, it had a slight rebound on Wednesday. The stock jumped 5% yesterday after a top financial news outlet reported the company is making some moves that could be beneficial. Moreover, an analyst upgraded their recommendation on the stock.

Why we care

On Wednesday morning, The Wall Street Journal published an article that Netflix is actively reviewing its operations for areas where it can save money. According to “people familiar with the matter,” this includes re-evaluating its real estate holdings and cloud computing expenses.

The source for the article states that the firm has been actively recruiting more junior employees. That’s presumably because these employees would need smaller salaries.

Overall, Netflix’s operating costs were $23.5 billion in 2021, up 15% from the 2020 level. Meanwhile, the streaming video king’s subscriber count has been declining recently. The company has already said that it will reduce content and non-content expenses. Netflix hasn’t made an official statement about the Journal story yet.

Now what

Meanwhile, Macquarie Group analyst and long-time Netflix tracker Tim Nollen raised his recommendation on the stock. He now thinks it’s worth a neutral rating rather than his previous designation of underperform (sell). He’s also raising his price target substantially, boosting it to $230 per share from the previous $170.

Nollen based his designation change on Netflix’s plan to introduce an ad-supported subscription tier. He wrote in a new note that the company could make $3.6 billion from this. However, when considering the most probable lower subscription prices for such a tier, it would be more like $1.1 billion in earnings.

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