Netflix Begins to Claw Back After Reed Hastings Buys $20 Million in Shares
Stock up 11% on Monday, as company battles back from 30% decline
Netflix stock continued to claw back from the hole it dug itself in the wake of disappointing Q4 results, rising more than 10% on Monday after it was revealed over the weekend that chairman and co-CEO Reed Hastings purchased $20 million worth of company shares.
Hastings purchased more than 50,000 shares of Netflix stock at an average price of $388 each on January 27 and 28, according to a filing with the Securities and Exchange Commission, increasing his personal holdings in the company to 5.16 million shares.
Hastings’ purchases came on the heels of hedge fund legend William Ackman’s disclosure that his Pershing Square Capital Management purchased about $1 billion in Netflix stock on January 21, which sent the stock up 7.5% on January 27.
Hastings’ purchases are seen as a vote of confidence in the stock, especially after Netflix missed subscriber growth targets in Q4 and issued Q1 guidance that some investors interpreted as a sign that streaming video was losing favor with consumers.
Netflix shares were priced as high as $427.69 each on January 31, up 11.3% ($43.33 per share), before closing at $427.14 up 11.1%. Since January 25, when the stock closed at $366.42 -- down 28% from its January 21 close -- the stock has regained about half of those losses.
Netflix isn’t the only streaming stock that has been battered after reporting disappointing results -- Disney and ViacomCBS stocks are both down significantly since reporting sluggish growth in their direct-to-consumer products in November -- and it won’t be the last. But as some investors see the slowdown as a signal to jump ship, others see opportunity.
In a research note, Wells Fargo Securities media analyst Steven Cahall wrote that he has seen an increase in Netflix interest after the so-called “Streaming Meltdown” from growth-at-a-reasonable-price (GARP) investors, adding that there is some debate as to whether the expected slowdown in Netflix subscriber growth will be as dramatic as the company has indicated.
“The conspiracy theorists believe this is part of management looking to shatter the annual expectation for 25-30 million net adds, and redirect attention to overall financial growth,” Cahall wrote. “No one has much of a handle on what the new rate of sub growth will be, though there's general agreement that EPS growth will remain firmly in the mid-20%s. With Netflix [Calendar Year] 2023 P/E [ratio] of 24x, this seems like a GARPy opportunity.” ■
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Mike Farrell is senior content producer, finance for Multichannel News/B+C, covering finance, operations and M&A at cable operators and networks across the industry. He joined Multichannel News in September 1998 and has written about major deals and top players in the business ever since. He also writes the On The Money blog, offering deeper dives into a wide variety of topics including, retransmission consent, regional sports networks,and streaming video. In 2015 he won the Jesse H. Neal Award for Best Profile, an in-depth look at the Syfy Network’s Sharknado franchise and its impact on the industry.