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Goldman Sachs downgrades Netflix rating to ‘sell’

Shares in the streaming service dropped by 5 per cent following the announcement

Netflix’s stocks were hit on Friday following a downgrade in the streamer’s rating from Goldman Sachs.

In a note to investors, analyst Eric Sheridan downgraded Netflix from ‘neutral’ to ‘sell’.

“We have concerns around the impact of a consumer recession as well as heightened levels of competition on demand trends, both in the form of gross adds and churn, margin expansion and levels of content spend,” said Sheridan.

Shares in Netflix dropped by 5 per cent following the release of Sheridan’s analysis.

The downgrade in Netflix’s ratings comes as investors worry over consumers dropping subscriptions to streaming services due to the global economic downturn.

“We downgrade Netflix to sell (from prior neutral rating) as we have concerns around the impact of a consumer recession as well as heightened levels of competition on demand trends (both in the form of gross adds and churn), margin expansion, and levels of content spend and view Netflix as a show-me story with a light catalyst path in the next 6-12 months,” added Sheridan.

Earlier this year, Netflix predicted it is likely to lose around 2 million subscribers during the current quarter.

Executives are now looking at a possible advertising-supported tier in order to reduce subscription charges. It’s believed that could launch by the end of 2022.