Netflix, Inc. (NASDAQ:NFLX) is a big decliner this session with its shares dropping nearly 4% following a downgrade to ‘Underperform’ from ‘Neutral’ at Macquarie. In a research note published today, the firm said that competition and increasing content costs – Netflix is currently burning cash to grow, particularly outside of the U.S.- could hinder sub growth going forward. Furthermore, Macquarie warned that while the company will succeed over time—Netflix has a great deal of money and premier viewership data, it admits the near term for the video streaming giant will not be easy. The firm set an $85 price target on the shares, implying 10.50% expected downside.
Macquarie also noted that in the U.S. Netflix’s competition is getting tougher, as online retailer Amazon.com (NASDAQ:AMZN) has doubled its content spending this year and many new Internet video services are entering the market. The firm pointed out that in order for Netflix to succeed overseas – the company expanded from around 60 countries to over 190 countries at the beginning of the year – it will have to make partnership deals with local entities or buy original content to fill the catalogs of the 130 countries it just added. Both options will be expensive and Netflix’s current content obligations, which have reached $16 billion to $18 billion, including ‘unknown’ off-balance sheet commitments, could increase further, the firm stated.
It is worth noting that in order for Netflix to justify its growing content expenditures, it will need to see better subscriber growth numbers. Macquarie however, expects the co.’s international subscriber base to reach 73 million by fiscal 2019, below the Street’s consensus estimate.
Netflix Stock Action
Netflix lost $2.68 to $96.37 in mid-day trading today, within a 52-week range of $15.17 to $24.35. Approximately 7.5 million shares have already changed hands, compared to the stock’s average daily volume of 10.85 million shares.
On valuation-measures, shares of Netflix, Inc. have a trailing-12 and forward P/E of 301.16 and 110.47, respectively. P/E to growth ratio is 6.29, while t-12 profit margin is 1.85%. EPS registers at $0.32. The company has a market cap of $41.32 billion and a median Wall Street price target of $110 with a high target of $130.
On trading-measure, NFLX has a beta of 1.00 and a short float of 32,7 million. In the past 52 weeks, shares of Los Gatos, California-based company have traded between a low of $79.95 and a high of $133.27, with the 50-day MA and 200-day MA located at $95.50 and $96.18 levels, respectively.
NFLX currently prints a one year return of 1.58%, and a year-to-date loss of 13.40%.