BofA Says Netflix's September Churn Higher, Downloads Lower

The controversy over the release of “Cuties” on Netflix Inc NFLX has led to some uncertainty around churn and subscription numbers for the company.

The Netflix Analyst: BofA Securities analyst Nat Schindler maintains a Buy rating on Netflix with a $575 price target. 

The Netflix Headwinds: Schindler named several headwinds that he said could impact Netflix shares going forward.

The headwinds are increased competition from platforms like Disney+ and Peacock; the large influx of new subscribers in the first half of 2020; the return of live sports; the return of movies; and elevated churn from “Cuties.”

Analyzing Netflix's Churn, Subscriber Numbers: Schindler looked at data from ANTENNA and Google Trends to see how Netflix churn could be playing out. 

ANTENNA shows churn in August was at a monthly rate of 2.97%. That's higher than the July figure of 2.72% and August 2019’s 2.93%.

After the controversial “Cuties” was released, the term “Cancel Netflix” saw a huge spike and its highest figure ever on Google Trends, which the analyst said could have hurt September churn numbers.

Daily U.S. cancellations tracked five times higher than average in the short period of time after “Cuties” was released, he said. 

That's significantly higher than the 1.7x increase to the average when The Walt Disney Company's DIS streaming platform Disney+ was released, Schindler said. 

Data from SensorTower shows mobile downloads of Netflix have slowed, the analyst said. 

In the third quarter, downloads were down 2% year-over-year in the United States and up 1% year-over-year in international markets, he said. 

The third-quarter download figures are down 23% from the second, Schindler said. 

“We see added uncertainty for upside to guidance and believe investors are likely expecting the magnitude of potential upside to be less than 1Q/2Q.” 

NFLX Price Action: Netflix shares were down 3.77% at $507.61 at the time of publication Friday. 

Photo courtesy of Netflix.