NFLX Stock Hurt By Chasing WBD Deal, Media Veteran Tom Rogers Reportedly Says – Warns AI Content Is Netflix’s Next Big Challenge

• Rogers warned that the next programming challenge for Netflix is AI-generated content, both by professionals and users.
• He highlighted that the key competitor for Netflix in this regard is YouTube, not other traditional media sources.
• Rogers also expressed concerns that the $70 billion deal to acquire Warner Bros. Discovery and its content library would have taken Netflix’s focus away from the AI challenge in the medium term.

Netflix Inc. (NFLX) shares tanked more than 10% in Friday’s pre-market trade after the streaming giant’s second-quarter (Q2) forecast missed Wall Street estimates, but media veteran Tom Rogers reportedly thinks there is another reason that’s pulling down the NFLX stock.

During an interview with CNBC, Rogers stated that Netflix's pursuit of the Warner Bros. Discovery Inc. (WBD) deal to boost its library of traditional media may have hurt the company’s stock.

“I think it clearly hurt the stock, and it clearly raised the issue in a lot of investors’ minds, ‘Do they need to do this?’. I don’t think they needed to do it, I think they’re going to win far and away the long-term entertainment streaming game with or without that acquisition,” Rogers added.

Rogers Points To The Next Challenge For Netflix, And It’s About AI

The media veteran warned that the next programming challenge for Netflix is AI-generated content, both by professionals and users. He highlighted that the key competitor for Netflix in this regard is YouTube, not other traditional media sources.

“We’re seeing YouTube’s viewership growing by leaps and bounds. YouTube today has 50% greater viewership than Netflix does on TV,” he added.

Rogers also expressed concerns that the $70 billion deal to acquire Warner Bros. Discovery and its content library would have taken Netflix’s focus away from the AI challenge in the medium term.

He also noted that Netflix could have obtained access to traditional media libraries for far less than the $70 billion it was ready to pay for WBD, and that it wouldn’t have had to leverage itself with this approach either.

Wall Street Split

Meanwhile, Wall Street is split on Netflix following the company’s first-quarter (Q1) results and its second-quarter (Q2) forecast.

According to TheFly, analysts at JPMorgan reiterated their ‘Overweight’ rating and $118 price target for Netflix following the results, recommending that investors should buy the stock on the selloff. The firm added that Netflix is continuing to execute its strategy effectively, with considerable growth headroom going forward.

However, Barclays analysts trimmed their price target for NFLX to $110 from $115, noting that the market’s reaction post-earnings points to potential risks to expectations that could persist beyond the short term.

Analysts at Wolfe Research noted that the Q2 forecast miss points to slowing sales and margin momentum for Netflix, lowering their price target to $107 from $110 while keeping an ‘Outperform’ rating.

Morgan Stanley analysts stated that they would “buy the dip” in the Netflix stock, while keeping their $115 price target and an ‘Outperform’ rating.

Netflix reported earnings per share (EPS) of $1.23 on revenue of $12.25 billion, beating estimates of an EPS of $0.77 on revenue of $12.17 billion, according to Fiscal.ai data.

The firm forecast EPS of $0.78 on revenue of $12.57 billion in Q2, missing Wall Street estimates of $0.84 on $12.64 billion in revenue.

How Did Retail Traders React?

Retail sentiment on Stocktwits around Netflix trended in the ‘extremely bullish’ territory, with message volumes at ‘extremely high’ levels.

One user stated that while everything about Netflix’s earnings was great, their forecast made no sense.

Another user thinks it was great that Netflix did not acquire WBD.

NFLX stock is up 15% year-to-date, while WBD stock is down 5%. The S&P 500 ETF (SPY) is up 33% over the past 12 months, while the Invesco QQQ Trust (QQQ) is up 44%.

Also See: FLNC Stock Has Dropped 24% This Year — And More Pain May Be Coming Due To Trump Administration’s Tax Policies

For updates and corrections, email newsroom[at]stocktwits[dot]com.