Netflix (NFLX) has chosen Microsoft (MSFT) to help roll out its new ad-supported offering - but one analyst says the deal could hide "a hidden agenda" while questioning the timeline of this deal .
“Netflix may be looking for an exit,” Laura Martin, senior analyst at Needham, told Yahoo Finance Live on Thursday, suggesting the streaming giant may be playing for the long haul to be acquired by Microsoft.
The analyst went on to explain that no other company Netflix could have partnered with would have been able to make the $100 billion purchase, whether due to financial constraints or regulatory issues.
“Netflix is trying to get closer to Microsoft in the hopes that after Microsoft has processed its Activision acquisition, Microsoft will switch and buy Netflix,” Martin suggests.
The bold prediction comes as Martin questioned Netflix's decision, given Microsoft's lack of experience in third-party advertising technology.
Microsoft will need a significant tech build to successfully represent Netflix, delaying the streamer's original timeline to release an ad-supported tier by the end of this year, according to Martin.
Martin predicted that it is now likely that an ad tier will not debut until the third quarter of 2023.
"Wall Street hasn't priced that in yet — they're not going to like that," she said, stressing that investors wanted "ad revenue to come to Netflix faster."
In a note to customers published Thursday, Goldman Sachs analysts echoed this sentiment and said the company continues to navigate a rapidly changing streaming landscape.
"When analyzing a variety of data sources on Netflix's operational trends, it remains clear that Netflix is still mired in a period of normalization in post-pandemic growth, while also witnessing increased competition across the industry," he wrote. Goldman Sachs analyst Eric Sheridan.
Sheridan added, "Concerns about the impact of a consumer recession and heightened competition on demand trends," along with margin pressures and costs, leave Netflix at least as a "show-me" story in the coming quarters. Sheridan maintained his sales rating on Netflix stock.
Both analysts also question the timing of the ad-supported expansion — both strategic and operational — as suggested by Netflix's agreement with Microsoft.
“Netflix announced on their earnings call three months ago that they were getting an ad company — they still haven't hired a head of ad sales,” Martin said. "The idea that you don't have anyone in the realm who is an expert at advertising, and yet have chosen an advertising partner for the tech stack is retarded."
After reporting a surprising loss of 200,000 subscribers in its first quarter report, Netflix will report quarterly results next Tuesday after the market closes. Shares fell more than 30% after the company's first quarter report.
Both Martin and Sheridan expect next week's results to disappoint investors.
Brian Sozzi is a great editor and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and further LinkedIn.
Alexandra Canal is a Senior Entertainment and Food Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at alexandra.canal@yahoofinance.com
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