The latest earnings figures from streaming giant Netflix (NFLX) did not look very good. Launched in mid-July, the company delivered a second straight quarter of subscriber losses. However, it also projected a net profit for the third quarter. New reports suggest a possible way forward for Netflix. Creative Media founder and president Peter Csathy suggested that Netflix was simply overlooking a lot of the franchise’s potential by producing horror movies.
He pointed to several other recent hits, including the revitalized “Scream” franchise, as well as the more recent success of “Insidious” and the new revival of “Halloween,” as shown on NBC’s Peacock platform.
Csathy’s claims come at the right time, but is it as simple as that? Netflix may have a huge opportunity tapping into the horror market. It is certainly the right time; Horror’s prime time is coming up with the fall of North America.
In April, I was optimistic about Netflix. However, I have since switched to neutral. Two quarters in a row of subscriber losses are crying out for a solution. That solution may just be screaming after all.
The past 12 months for Netflix stock featured a slow rally that stretched from August through November. This was quickly followed by a slow decline, then two sharp declines about three months apart. Now, the company has plateaued, mostly hovering in the $175 to $225 range for the past three months. However, that is substantially down from its 52-week high of $700.99.
What are analysts saying about NFLX stock?
Looking at Wall Street, Netflix has a Hold consensus rating. That’s based on seven buys, 19 holds and six allocated sales in the last three months. Netflix’s average price target of $229.30 implies 1.8% downside potential.
Analysts’ price targets range from a low of $157 per share to a high of $365 per share.
Netflix Smart Score Suggests Decent Performance Ahead
Right now, investor sentiment is clearly desperate for a new big draw. NFLX has a smart score of 7 out of 10 on TipRanks. That’s the highest level of “neutral,” suggesting a slight chance that Netflix will eventually outperform the broader market.
However, retail investors appear to be losing faith. The number of TipRanks portfolios that held Netflix shares fell 0.4% in the past seven days. However, this figure has increased by 0.5% in the last 30 days, suggesting that the radical change that is taking place has only just begun.
Is it really as simple as adding horror movies?
So what about terror? Is Peter Csathy right that horror will solve Netflix’s ills? Well, he may have the right idea, but it may not be that simple. Csathy has an excellent point about the impact of horror in general. Netflix’s “Stranger Things” is actually his most watched show. It also recently held the title for the most watched streaming series in a single week.
Meanwhile, in July of last year, Netflix also had a hit with “Fear Street,” a series of three releases covering different time periods. The miniseries turned out to be one of Netflix’s most popular releases, reports noted at the time.
Those two points together give Csathy’s point of view a lot of extra credence. Better yet, there’s plenty of pre-pandemic evidence that horror was an excellent investment. Horror movies tend to attract a diverse following among the younger demographic.
In 2017, the horror movie market grossed over a billion dollars at the box office alone. Spurred on by titles like “The Nun” and, yes, the first installment of the second “Halloween” revival, horror proved its chops in the late pre-pandemic era.
A 2017 study of Movie revealed that 44% of paranormal horror fans would go to the movies at least once a month. Similar numbers of 56% of science fiction fans were found.
For the biggest indicator of success in horror movies, though, look no further than Blumhouse Productions. For years, Blumhouse struggled to get movies into theaters.
However, a series of hits, beginning with Paranormal activity and recently emerging with the purge Y Saltamong others, they changed people’s opinion. Salt it required just $4.5 million to produce but grossed $255.5 million worldwide, offering yet another reason to enter the field.
Horror movies tend to have loyal fans. the Movie The study supports this notion and includes more anecdotal information from individual horror enthusiasts. However, it may not be as simple as previous studies indicate.
After all, much of that data comes from a time when video stores were still in business. Family Video’s permanent shutdown in early 2021, thanks mainly to COVID-19 lockdowns and a sizzling release pipeline, changed the field forever. There is certainly a market for horror broadcasting.
The biggest proof of this is the existence of Shudder, a streaming service that recently surpassed the one million subscriber mark. However, the market is no longer what it used to be. Meanwhile, the comparatively recent nature of the changes precludes large-scale studies.
Conclusion: Would horror movies make a purchase of NFLX stock?
Will Netflix be able to recover its lost audience with horror? It is certainly possible. Netflix has already done quite well with horror releases. Shudder’s momentum suggests there is a market out there. Netflix’s deep pockets could fund quite a few horror scripts, allowing it to better find which ones could become entirely new franchises in the works. The evidence suggests that it could be a good plan. Still, for now, I remain neutral. No matter what Netflix finally pulls out of its hat, it needs to pull something out fast.
Financially, horror movies have often been big business for their studios. Its comparatively low cost and generally interested market certainly help. It remains to be seen if a large repertoire of scares will change the Netflix market.