Netflix, Inc. Offers Great Value Product But Still Is A Sell: Analyst

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Netflix is a well-managed company, and its product is of great value to the consumers, believes Wedbush Equity analyst Michael Pachter. However, the analyst still maintains a Sell rating on the company’s stock.

Netflix potential already discounted in

Pachter believes investors have given too much credit to Netflix for its ability to “thrive in that future world where we all ‘cut the cord’ and consume content” over the Internet.”

According to Pachter, the streaming company will continue to be profitable, but the market has “discounted too deeply the potential for competition” as well as the desire for content owners to “extract as much economic rent [as possible] from providers like Netflix.”

However, other analysts differ from Pachter and are positive on the stock. Cantor analyst Youssef Squali increased his price target from $450 to $500. Another analyst, Paul Vogel from Barclays, also raised his price target from $400 to $450 for the next 12 months.

Others bullish on Netflix

Squali, who maintains a Buy rating on Netflix, stated that the recent trend around TV un-bundling is a primary factor for his bullishness. Such momentum could push the shift towards internet TV faster and should eventually benefit Netflix.

Squali added that the online streaming company offers the widest range and the lowest priced online video content libraries at just $8.99 per month. Also the analyst pointed out that Netflix shells out more funds for content compared to competitors.

Vogel was slightly less positive and has increased his price only because shares are currently trading around $418, above his previous call for $400 per share.

In his note, Vogul mentioned that even though shares are surging higher, there is always confusion on how to value the stock due to its comparatively low profit per customer, increased content spend and stepped-up global competition. Netflix will keep increasing its spending on content, which will pressurize margins, and with a slowing U.S. subscribers growth rate, there is limited upside to the stock at current levels, said Vogul, who has an Equal Weight rating on the stock.

On Thursday, Netflix shares closed down 0.83% at $418.26, while year to date, the stock is up by almost 22%.

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