Internet television network Netflix (NFLX) is facing a heightened risk of subscriber churn now that the popular licensed TV series “The Office” has moved to Comcast‘s (CMCSA) rival service Peacock, one analyst says. Netflix stock has been moving sideways for months after surging during the stay-at-home entertainment boom spurred by the Covid-19 pandemic.
In a note to clients on Tuesday, Rosenblatt Securities analyst Bernie McTernan said his firm’s latest consumer survey showed a spike in people likely to cancel Netflix in the next three months. Reasons for the increase include the loss of “The Office” as well as a recent service price increase, he said.
“The percent of respondents who are likely to cancel Netflix over the next three months substantially rose with 32% very likely or likely to cancel the service in aggregate, relative to 13% on average in our four prior surveys,” McTernan said.
McTernan reiterated his neutral rating on Netflix stock but raised his price target to 425 from 400.
Price Hike Also Factor In Subscriber Churn
In midday trading on the stock market today, Netflix stock dropped 0.7%, near 519.30.
The NBC situation comedy “The Office” has been a huge hit with viewers on Netflix. It moved to Peacock at the start of 2021 and is now anchoring that fledgling service. Comcast owns both NBC and Peacock. “The Office” ran on NBC from 2005 to 2013.
“In our survey, 46% of respondents with Netflix indicated they watched the show over the past month,” McTernan said. “In addition, 24% of respondents plan on canceling the service as a result of ‘The Office’ leaving.”
Meanwhile, 39% of respondents with Netflix indicated that they plan to sign up for Peacock, he said.
Netflix’s recent price increase of $1 on its standard plan and $2 on its premium plan also will cause some subscriber churn, McTernan said. The standard Netflix plan now costs $13.99 a month while the premium plan costs $17.99.
McTernan estimates that Netflix will lose a net 200,000 subscribers in the first quarter in the U.S. and Canada, vs. analyst estimates for a gain of 700,000.
Netflix Stock Ranks First In Industry Group
Netflix stock hit a record high of 575.37 on July 13 before swooning as much as 20% over the next few months. It has been consolidating for the past 26 weeks at a buy point of 575.47, according to IBD MarketSmith charts.
Netflix stock ranks first out of 19 stocks in IBD’s Leisure-Movies & Related industry group, according to the IBD Stock Checkup tool. It has an IBD Composite Rating of 89. IBD’s Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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