Netflix shares slide after layoffs, content chief exit

Netflix ↘ 2.86% shares fell on Friday, Oct. 16. Investors were reacting to a week that brought the streamer's largest layoffs in years and the abrupt exit of its content chief, just days before third-quarter results. The stock was down about 2.3% in late-morning trading, GuruFocus reported via Yahoo Finance.finance.yahoo.com

On Wednesday, Oct. 14, Netflix cut about 1,000 jobs, or roughly 6% of its staff. On Thursday it said Chief Content Officer Bela Bajaria would leave and that former Disney The Walt Disney Company ↘ 0.08% executive Peter Rice would replace her starting Oct. 26, CNBC Comcast Corporation ↗ 0.60% reported. The New York Times ↘ 1.68% tied both moves to slowing growth and a share price that has fallen more than 40% over the past year.proactiveinvestors.com+1

Wall Street trims targets

Analysts had already been lowering their expectations before the shake-up. Barclays ↘ 0.09% cut its price target to $70 from $80 on Oct. 7, and Morgan Stanley ↘ 0.84% cut its target to $80 from $83 on Oct. 8, Tradingpedia reported. KeyBanc KeyCorp ↗ 0.25% analyst Justin Patterson lowered his target to $85 from $92 and kept an Overweight rating. He pointed to currency headwinds and smaller margin gains from content spending, according to Yahoo Finance. Huber Research separately downgraded the stock to Underweight.finance.yahoo.com+1

Wedbush cut its target to $90 from $105 and kept an Outperform rating. The firm called the leadership change a positive catalyst. "Engagement remains central to the bear case; however, ad revenue matters more," Wedbush wrote. It said ad revenue is on track to roughly double to about $3 billion in 2026, though it added that the ad ramp could take longer given the changes under way, Proactive Investors reported.proactiveinvestors.com+1

What to watch on Oct. 20

Wedbush expects third-quarter revenue of $12.865 billion and earnings of $0.83 per share. Consensus estimates are $12.88 billion and $0.82, and company guidance is $12.86 billion. Wedbush also forecasts 2.2 million net paid additions, including a decline of 500,000 in the U.S. and Canada, according to Proactive. In a memo to staff, Netflix said it remains on track for its 2026 guidance of $51.0 billion to $51.4 billion in revenue and a 31.5% operating margin.proactiveinvestors.com

Netflix will report results on Tuesday, Oct. 20. Co-CEO Ted Sarandos will then hold a companywide town hall on Wednesday, Oct. 21, Deadline reported.deadline.com

A new content operator

Rice will oversee scripted and unscripted series, film and live events across all regions, Variety reported. Bajaria had run Netflix's roughly $20 billion annual content budget. Sarandos called Rice "one of the most effective at-scale operators in the entertainment industry," according to Yahoo Finance. For investors, the open question is whether that operating focus will lead to better returns on content spending, which is likely to take longer to show than a change at the top.variety.com+2