Netflix to lay off 300 workers, BofA slashes price target on the stock

Yahoo Finance entertainment reporter Allie Canal joins the Live show to break down Netflix's decision to lay off employees and Bank of America's price target slash on the streaming platform's stock.

Video transcript

SEANA SMITH: All right, well, a double dose of bad news for Netflix. Now, the stock getting a price target cut and the company announcing layoffs. Alexandra Canal is here with the details. Allie, let's start with the layoffs. It's the second round here for the streaming giant. What can you tell us?

ALEXANDRA CANAL: Yeah, the company confirming in a statement to Yahoo Finance they are laying off an additional 300 people. This comes after May's layoffs, which we had 150 people let go from the company. Now Netflix specifically cited that they're doing this to try and offset, quote, "slower revenue growth." We know that Netflix has been going through a bit of a challenging time right now. Emily was just outlining how the stock is down more than 70% year to date.

And right before these layoffs, we got a note from Bank of America that said they will be slashing their price target on the stock from $240 a share to $196 a share. They cited quite a few reasons for this, but number one being the fact that streaming is commoditized right now. It's saturated. Netflix is considered a must have item, but that could actually be a negative thing. It could be a curse for the company, because that means moving forward, they're going to have to seek out their subscribers overseas, not necessarily in the United States.

Now, Netflix, they're trying to roll out different types of offerings, like their ad-supported offering that will come out later this year. There was a "Wall Street Journal" report this morning that they're reportedly seeking partnerships with either NBCUniversal, maybe Google, to try and roll out that ad-supported offering. They're also testing a crackdown on password sharing in places like Chile, Costa Rica, Peru. So it's clear that the focus has shifted a bit for this company. They're focused now on profitability, on free cash flow. They want to up that revenue. And with that, unfortunately, layoffs are a reality.

SEANA SMITH: Allie, you mentioned that ad-supported tier. On the Street, is that something that analysts are excited about? I know we got that one note from Cowen saying that it could be a multi-year revenue opportunity for Netflix.

ALEXANDRA CANAL: It could, but there are some analysts on the Street that say it's not going to have a really material impact, a significant impact to offset all of the content spend. They spend $18 billion on content annually. And that's something that you have to keep in mind going forward. At the same time, though, you also have to be a platform that has really strong original content to try and stand out amidst all the competition. So that's something to keep in mind. But I do think when it comes to ad-supported offering, it's a wait and see approach.