Netflix rolls out an ad-supported tier: ‘ads won’t be the saviour’

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Netflix Inc (NASDAQ: NFLX) is in focus this morning as the streaming giant rolled out its much-anticipated ad-supported tier that costs just $6.99 a month.

Kantrowitz shares his outlook on Netflix

Interestingly, though, Alex Kantrowitz – the Founder of “Big Technology” does not expect that low-cost subscription to be the ultimate saviour of Netflix.

On CNBC’s “Worldwide Exchange”, he said a bigger problem for the Nasdaq-listed firm was really the macro environment.

I don’t think ads will be the saviour. You heard Jay Powell yesterday. We’re going through a fundamental revaluation of tech companies. And Netflix has higher burden than many others because unlike, say, Amazon, it’s not a platform.

A day earlier, Fed Chair Powell lifted rates by another 75 basis points and said it was “very premature” to consider pausing just yet. (read more)

Ads won’t do much for the Netflix stock

In October, we reported Netflix to have added 2.41 million subscribers in its fiscal third quarter, more than double the 1.1 million that Street had expected.

And it’s not that Kantrowitz doesn’t see “advertising” as a positive for the streaming company. He does agree that the cheaper subscription will help minimise churn. But it won’t do much for the stock price, he added.

NFLX is still fairly expensive. It’s $121 billion versus Disney at $185 billion. And Netflix doesn’t have any theme parks. So, it’s good for Netflix but something that’ll reverse the 54% YTD decline, that’s a bit of a stretch.

Added competition from Disney, Amazon, Paramount and what not will also be a headwind for NFLX moving forward. Netflix stock has already recovered nearly 65% versus its year-to-date low.

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