Netflix, Inc. – Dropping Estimates Suggest Weakness Ahead

Netflix, Inc. (NASDAQ:NFLX) shares have dropped considerably over the past four weeks along with a negative earnings estimate revision for the current quarter, as well as for the current fiscal year. According to a report from Zacks, investors should consider selling Netflix shares before suffering more losses.

Netflix rated Strong Sell

According to Zacks analysts, getting rid of underperforming stocks at the right time maximize the returns. Selling such stocks could be difficult, but if the share price and estimates both are coming down, “it could be time to get rid of the security before more losses hit your portfolio.”

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Zacks analysts maintain a Strong Sell rating on Netflix. One of the reasons for such stance is the negative guidance for earnings. For full year, the report noted that 16 estimates have been lowered in the past 30 months, against just one upward revision. Not surprisingly, consensus estimates have also dropped from $3.89 per share a month ago to the current level of $3.48.

For the current quarter, the online video streaming company has seen a total of 15 downward estimate revisions and no upward revisions, lowering the consensus estimate down to 44 cents per share from 96 cents over the past 30 days.

The analysts at Zacks argue that it would not be wise to keep the stock in your portfolio, especially if you are not going for a long-term view.

Not everyone selling Netflix

However, First Hand Capital Management analyst Kevin Landis is positive on Netflix shares even after recent drop. Landis said that he is holding his position in the stock, and the best opportunity to pick the Netflix stock was when the company decided to scrap the DVD business to enter new segments, which made many consumers unhappy. He said that the last quarter has reopened the doors for investors to take a position in Netflix, and feels it is a good stock to own right now.

Netflix’s dim quarterly numbers were the outcome of low new subscriber additions. The online video streaming company projected to add 3.7 million new subscribers globally in the last quarter, but only ended up with 3 million adds. Furthemore, subscriber growth in the United States declined 300,000 year over year, which was another major concern.