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Netflix to lay off roughly 150 employees amid financial cutbacks

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Yahoo Finance reporter Allie Canal reports on how after a tough start to the year, Netflix is eliminating approximately 150 positions mostly based in the U.S.

Video Transcript

DAVE BRIGGS: A couple of days ago, there was word from Netflix that if you didn't like the content, you were free to quit, making a lot of people think, are there layoffs coming? Allie Canal here with the answer to that question. Hi there, Allie.

ALEXANDRA CANAL: Hi, Dave, yeah. Layoffs are now hitting Netflix. Earlier today, the streaming giant confirming to Yahoo Finance that they will be laying off about 150 positions of the streamer's 11,000 workforce. That will be in an effort to reduce spending and offset slowing revenue growth.

In a statement sent to Yahoo Finance, a Netflix spokesperson said, quote, "As we explained on earnings, our slowing revenue growth means we are also having to slow our cost growth as a company. So, sadly, we are letting go around 150 employees today, mostly US-based. These changes are primarily driven by business needs, rather than individual performance, which makes them especially tough, as none of us want to say goodbye to such great colleagues. We're working hard to support them through this very difficult transition."

Now this isn't entirely surprising. It's something that we've heard time and time again from analysts, saying that Netflix will ultimately have to do this. They've been spending money like crazy, especially on content. $17 billion plus on that front, which, by the way, Netflix told me, they still plan to do, saying, quote, "We are still investing heavily in our business," but there are pains to that. We saw an unexpected decline in Q1 subscribers. That led to a stock plummet of 35%, wiping off more than $50 billion of its market cap. Shares are down more than 68% year to date.

But we've heard time and time again from analysts that this reaction is a bit overdone. Netflix has just hit that saturation point before other competitors, Disney+, for example, still pretty early on in its streaming journey. And besides these layoffs, there are other things that Netflix is doing to address those financial hardships, to address the subscriber slowdown. We have an ad-supported offering coming up later this year, a crackdown on password sharing, all opportunities to drive revenue, which is why I think analysts like those at Wedbush, for example, are optimistic about the company.

Yesterday, we saw Wedbush reiterate its price target of $280 a share and upgrading the stock from neutral to outperform. So although layoffs are never a great thing to hear about, this seems to be something that the Street wants to see from the company at this point. Netflix shares closed higher today, up more than 2% in afterhours action. They are up about a tenth of a percent. So trading a little bit flat in afterhours, but we saw that stock pop earlier today. So this is something that investors, I think, wanted to see.