It was an odd day to be streaming giant Netflix (NASDAQ:NFLX). Several news items emerged all at once to suggest that Netflix might have some significant challenges on its hands. These challenges are starting to weigh on Netflix, as shares were down nearly 2.5% in the closing minutes of Monday’s trading.
First came the revelation that Netflix’s ad-supported plan has one minor flaw: it’s not big enough. Even though Netflix is pretty much the top dog when it comes to streamers, it just barely manages to crack the top 10 when it comes to advertising platforms, according to Bloomberg.
In fact, Netflix is said to be looking into creating free plans in some areas in a bid to boost viewership numbers. This is similar to Hulu, which, way back when, was available to view completely free with ad support. In fact, reports suggest that Netflix actually lags Roku (NASDAQ:ROKU) in terms of ad sales.
Technical Difficulties
Meanwhile, Netflix is working on new ways to ensure the video that does reach customers is the best it can be. It has been working with a range of video codecs and similar tools to present the best video with the least bandwidth. In fact, over the last few years, Netflix has dialed down its bandwidth use to the point where its 4K streams take half the bandwidth they did previously.
And that’s a good thing; with live sports content in the near future, it’s going to need to present the best video it can for the least bandwidth. And on that note, one last bit of good news: no less than Triple H himself assures us that WWE’s Monday Night Raw on Netflix will be completely uncensored.
Is Netflix a Buy or Sell?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on NFLX stock based on 23 Buys, 12 Holds, and one Sell assigned in the past three months, as indicated by the graphic below. After a 61.15% rally in its share price over the past year, the average NFLX price target of $659.60 per share implies 1.43% downside risk.
