Slumps to continue at Netflix and Facebook owner Meta

Netflix’s growth has slowed more than Wall Street forecast amid mounting competition for viewers.

Facebook owner Meta and Netflix may have a hard time turning around the slumps that have wiped more than a third off their market value this year, as ongoing business headwinds and a weak macroeconomic backdrop keep investors at bay. 

The two internet giants were among the most high-profile disappointments of the last earnings season, with slowing growth at both companies sparking sell-offs that erased hundreds of billions of dollars in value. 

With fresh results around the corner, analysts are showing they remain sceptical by trimming their price estimates. The average target for both has fallen to its lowest since 2020, according to Bloomberg-compiled data. 

Netflix has shed more than 40% so far this year while Meta lost 36%. Both are among the worst-performing members of the Nasdaq 100 Index, which is down 13% in 2022.

While this has weighed on tech broadly, Netflix and Meta suffered bigger sell-offs. The streaming giant’s growth has slowed more than Wall Street forecast amid mounting competition for viewers, while Meta’s Facebook is also struggling to draw new users at the same time that it’s investing billions to expand in the so-called metaverse.

“The outlook is incredibly uncertain, and when the market is as uncertain as it is right now, investors will favour names with more certain fundamentals,” said Tavis McCourt, institutional equity strategist at Raymond James. 

For Meta, analysts continue to see headwinds stemming from a changed privacy policy at Apple, which has diminished the Facebook parent’s ability to target ads. Meta “is likely to see another rocky quarter” given this issue, RBC Capital Markets wrote in a note. 

Bloomberg