Netflix, Inc. (NASDAQ:NFLX) shares have come under selling pressure following its quarterly results, with slowing subscriber growth serving as a drag.
An analyst at Needham said a turnaround is unlikely if the streaming giant persists with its current strategy.
The Netflix Analyst: Laura Martin has an Underperform rating on Netflix shares.
The Netflix Thesis: Only about 50% of Netflix' U.S. subscribers are happier with its content now compared to a year-ago, Martin said, citing Needham's survey of 504 of the company's U.S. subscribers.
U.S. subscriber growth is harder going forward, the analyst said. This was premised on data that showed about 81% of the people surveyed watch Netflix, and 71% of them are paying subscribers, she added.
The U.S. streaming market is mature, going by a majority of respondents who said they will not pay for additional services in 2022, Martin said.
About 41% of the respondents suggested they are more likely to churn in 2022 due to Netflix' price increase, she added.
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Given the message coming through from the responses, Needham said Netflix can expand its total addressable market by adding an advertising tier to accelerate revenue growth.
The company could contemplate buying an old media library to improve its content "return-on-invested-capital" (ROIC), and building a competitive edge from owning intellectual property, the firm said. The streaming giant could add sports and/or news, it added.
"NFLX can NOT win the "streaming wars" given its current strategy, we believe," the firm concluded.
Netflix Price Action: At last check, Netflix shares were sliding 2.67% to $399.22.
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