Key Points
Reed Hastings is leaving Netflix’s board in June.
Hastings was reportedly in favor of the company’s plans to acquire Warner Bros., which it ultimately abandoned.
Investors appear concerned about the company’s future as Netflix’s stock has been declining since the announcement.
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Streaming giant Netflix (NASDAQ: NFLX) has transformed the way people watch movies and TV shows over the years. And co-founder Reed Hastings has been a big part of the company’s impressive growth. Recently, however, he has announced he will be leaving the company.
It’s a potentially unsettling development for Netflix, which has been a lackluster stock to own over the past 12 months, declining by 16% and underperforming the broader market. What does Hastings’ departure mean for Netflix, and could it result in more of a decline for the stock, or is it worth buying it today given its reduced valuation?
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Could this change Netflix’s long-term strategy?
While Hastings has been key in expanding the company’s vision over the years, he hasn’t been co-CEO since 2023, when he managed the company’s day-to-day operations along with co-CEO Ted Sarandos. Currently, it’s Sarandos and Greg Peters who are Netflix’s co-CEOs. Hastings currently serves as the company’s chairman, but will leave that position in June.
The announcement comes at an intriguing time, as Netflix recently walked away from a deal to acquire key assets from Warner Bros. Discovery, after a bidding war ensued with Paramount Skydance. Sarandos says Hastings supported the Warner Bros. deal, as did the board. Analysts, however, note that Hastings has typically avoided large acquisitions in the past.
With Netflix missing out on the Warner Bros. deal, question marks looming about its future growth, and new leadership at the board, it’s certainly possible that the company takes on a more aggressive strategy in the future, but it’s by no means a guarantee.
Should investors be worried about Netflix stock?
Since the announcement that Hastings will be leaving the company, shares of Netflix have been falling. Year to date, the stock has declined by around 2%, and it’s down more than 30% from its 52-week high of $134.12.
Hastings leaves the company in a strong financial position, with Netflix generating $11 billion in profit last year on revenue totaling $45 billion. Its revenue rose by 15%, which was strong, but it raises the question of whether management might be tempted to sacrifice some margin in exchange for more growth down the road. Netflix has achieved high profitability while also growing rapidly, something many of its rivals have struggled to do.
There is some uncertainty ahead, but given Netflix’s strong position today, I don’t think investors should worry about the business, and there’s no indication it will deviate significantly without Hastings involved. Buying the streaming stock on the dip today could be a good move for long-term investors.
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix and Warner Bros. Discovery. The Motley Fool has a disclosure policy.
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