Think twice before jumping into the pool to scoop up the beat-up shares of streaming giant Netflix, one analyst warns after a disappointing earnings report.
"It would not surprise us even off a substantial decline in the pre-market, that Netflix stock may be dead money amidst muted results in 1Q and the seasonally weak 2Q and the likely need to prove out that there is still significant growth left in streaming," said Pivotal Research Group analyst Jeff Wlodarczak.
The market appears to be thinking along the same lines on Netflix (NFLX).
Shares of Netflix crashed by as much as 21% to $408 in pre-market trading Friday as the company's fourth quarter earnings showed slowing subscriber growth and operating profit margin pressure. The company cited increased competition and the strong U.S. dollar among the reasons for the so-so report.
Netflix added 8.28 million global paid net subscribers in the last quarter of 2021, beating the 8.13 forecasted by analysts, according to Bloomberg data. But it's outlook wasn't too inspiring.
The company said it expects to add 2.5 million subscribers in the first quarter, compared to 3.98 million during the first quarter last year.
Morgan Stanley, KeyBank and Barclays all downgraded Netflix shares on Friday.
But Pivotal's Wlodarczak is staying hopeful on Netflix longer-term even as he thinks the stock may go nowhere in the near-term.
"In the end we think the Netflix flywheel is still working it is just operating at a slower pace given the massive pull forward of demand enabled by pandemic shutdowns and over time we expect normalization in subscriber results and for the stock to work," Wlodarczak added.
The analyst reiterated a Buy rating on Netflix but slashed his price target to $550 from $750.
Yahoo Finance's Alexandra Semanova contributed to this story.