Is Netflix Getting Its Groove Back?

Netflix stock has tumbled 40% from a peak last summer, but one analyst is arguing that Wall Street, much like the final season of Stranger Things, has officially lost the plot. 

Shares of the company leapt almost 3% on Tuesday after Wolfe Research analyst Peter Supino upped his price target for the company to $95. Supino argued that investors are overreacting to lackluster engagement data sparked by an uncharacteristically soft second-quarter release schedule. And recent reports suggest that Netflix is looking to get more and more premium content on its platform.

Third-Party Down

Overall viewing hours increased a mere 2% in the first half of the year, Netflix said in its engagement report earlier this summer. That prompted fears that the Binge Watch era will not simply run on auto-play forever, a distressing turn for a streamer that sees advertising as the key to continued growth. Making matters worse, Netflix deepened Wall Street’s fears by cutting its bi-annual engagement reports down to just one a year, and reports surfaced that executives were troubled by lackluster viewership for returning shows. 

According to Supino, the reaction was overblown. “After analyzing millions of data points from Netflix’s viewing history, we believe the timing of new content releases was largely to blame for soft 2Q subscriber and engagement results,” he wrote. The schedule for the rest of the year is looking bright, he argued. Meanwhile, the company continues to enjoy a massive subscriber lead over its competitors, allowing for margins that remain fatter and juicier than a prime roast of brisket from the Texas barbecue episodes of Chef’s Table.

And a recent report by The New York Times showed Netflix executives are thinking big to tackle the engagement question:

• Sources told the NYT that Netflix execs have discussed making competing streaming services, such as Peacock and Fox One, directly available on its platform. In June, Netflix essentially integrated French broadcaster TF1 directly into its service within the market.
• It all mirrors a strategy used by Amazon and Roku, which allow for add-ons to some streaming competitors within their platforms, as well as YouTube, which will soon offer Peacock within its Premium subscription tier. Roughly 33% of all new streaming subscriptions are now purchased within larger third-party platforms, market data platform Antenna told the NYT. 

I Will Find YouTube: In the meantime, as Netflix turns vanquished foes into commodities, it’s still locked in eternal warfare with its true rival: YouTube. After Netflix poached some high-profile podcasters and media channels earlier this year, YouTube is offering millions of dollars to top creators in exchange for at least a certain window of exclusivity, Bloomberg reported last week. In other words, expect a “Last Dab”-level extra hot bidding war for “Hot Ones.”