Why This Netflix Analyst Is Cautious Despite Strong Debut Of 'Stranger Things' Season 4

Zinger Key Points
  • Stranger Things S4 may have been the strongest debut for Netflix, but other data points do not show confidence.
  • App Rankings and search data suggests the strong viewership hours may not translate to net paid adds upside.

Netflix, Inc.'s NFLX "Stranger Things" season 4 made a strong debut, but this does not signal a turnaround in the fortunes of the streaming giant, according to an analyst at KeyBanc Capital Markets.

The Netflix Analyst: Brandon Nispel maintained a Sector Weight rating on Netflix shares.

The Netflix Thesis: "Stranger Things" represented Netflix's strongest debut, with 286.8 million viewership hours last week, Nispel said in a note. Given Netflix shows typically peak in the second week, "Stranger Things S4" appears to be on track toward reclaiming its status as Netflix's most popular show globally, he added.

The analyst, however, said the viewership hours should be taken with a pinch of salt.

"The total run time for Stranger Things S4 is 549 minutes, which compares to 256 minutes for Money Heist S5 (also a partial season), 507 minutes for Bridgerton S2, and 457 minutes for The Witcher Season 2 (S2)," Nispel noted.

Upon adjusting for episode length, Stranger Things S4's consumption is still impressive, but it lags that of the Money Heist S5 debut, the analyst said.

Related Link: Netflix Said To Be Rapidly Losing Support From Longtime Subscribers

"Country performance, search queries, and app data offer a more complete view," Nispel said.

The analyst noted that early app rankings do not indicate significant upside to paid net adds. Additionally, search queries for "Netflix" worldwide and domestically are trending lower year-over-year on an easy compare, he added.

Collectively, these data points suggest a miss vs. consensus second-quarter forecast of a loss of about 2 million subscribers, heading into the Stranger Things release, the analyst said.

"While Stranger Things could theoretically drive strength over the coming weeks, we believe this is a large task amid more time spent outdoors," KeyBanc said.

Netflix closed Tuesday's session 1.15% higher at $197.44, and share were up 0.41% during Wednesday's premarket session at $198.20, according to Benzinga Pro.

Photo: Courtesy of netflix.com

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Posted In: Analyst ColorEntertainmentReiterationAnalyst RatingsTechGeneralBrandon NispelKeyBanc Capital MarketsStranger Things
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