Analyst's lowered price target is nearly 10% below
Post# of 96897
Posted On: 03/16/2015 12:26:01 PM
Analyst's lowered price target is nearly 10% below current levels
Netflix' stock took a beating Monday, after investment banking advisory firm Evercore ISI recommended investors sell on concerns that intensifying competition would require the video streaming service to invest more in its business with uncertain return.
Analyst Ken Sena cut his rating on the stock (NFLX) to sell, after maintaining a hold rating the last five months, and a buy rating the four months before that. He also slashed his price target by 16% to $380, which is 9.7% below current levels, from $450.
The stock, which has taken investors on a roller-coaster ride over the last year, dropped 4% in morning trade to a near two-month low. It has lost 11% so far this month, after soaring 39% over the first two months of the year, and after tumbling 28% the last four months of 2014.
Sena explains that faster connection speeds and better video ad capabilities aren't just helping Netflix, but also its competitors, as it gives content providers more choices to deliver their content, and newer distribution partners the ability to offer greater scale and efficiency. In addition, he said content providers are becoming more proficient in their own over-the-top (OTT) offerings, which refers to offerings streamed directly to consumers over the Web.
"In the context of increasing competition among existing and emerging distributors, and with content providers becoming better equipped to leverage these newer channels through OTT offerings of their own, we view shares [of Netflix] as unattractive[/b ]," Sena wrote in a note to clients. "Further, even our newly lowered target price...still reflects a premium valuation."
He said recent examples of OTT offerings announced by content providers include Apple Inc.'s (AAPL) three-month exclusive deal to carry HBO now on Apple TV (http://www.marketwatch.com/story/hbos-online-streaming-service-is-coming-but-at-what-cost-2015-03-12), the live streaming of ABC network's "The Oscars Backstage (http://www.oscars.org/news/watch-abcs-oscarsr-backstage-stream-live-facebook-first-time)" on Facebook (FB), and Snapchat's new Discover platform (http://blogs.wsj.com/digits/2015/01/27/snapchats-discover-an-internet-portal-for-2015/).
Netflix's plan to expand internationally could help in the short term, but Sena doesn't believe it is a long-term solution to the threat of competition.
"While laudable, we not believe this will do enough to stem competition from a growing number of distributors or materially reduce the risk inherent in original content production," Sena wrote.
-Tomi Kilgore; 415-439-6400; AskNewswires@dowjones.com
Netflix' stock took a beating Monday, after investment banking advisory firm Evercore ISI recommended investors sell on concerns that intensifying competition would require the video streaming service to invest more in its business with uncertain return.
Analyst Ken Sena cut his rating on the stock (NFLX) to sell, after maintaining a hold rating the last five months, and a buy rating the four months before that. He also slashed his price target by 16% to $380, which is 9.7% below current levels, from $450.
The stock, which has taken investors on a roller-coaster ride over the last year, dropped 4% in morning trade to a near two-month low. It has lost 11% so far this month, after soaring 39% over the first two months of the year, and after tumbling 28% the last four months of 2014.
Sena explains that faster connection speeds and better video ad capabilities aren't just helping Netflix, but also its competitors, as it gives content providers more choices to deliver their content, and newer distribution partners the ability to offer greater scale and efficiency. In addition, he said content providers are becoming more proficient in their own over-the-top (OTT) offerings, which refers to offerings streamed directly to consumers over the Web.
"In the context of increasing competition among existing and emerging distributors, and with content providers becoming better equipped to leverage these newer channels through OTT offerings of their own, we view shares [of Netflix] as unattractive[/b ]," Sena wrote in a note to clients. "Further, even our newly lowered target price...still reflects a premium valuation."
He said recent examples of OTT offerings announced by content providers include Apple Inc.'s (AAPL) three-month exclusive deal to carry HBO now on Apple TV (http://www.marketwatch.com/story/hbos-online-streaming-service-is-coming-but-at-what-cost-2015-03-12), the live streaming of ABC network's "The Oscars Backstage (http://www.oscars.org/news/watch-abcs-oscarsr-backstage-stream-live-facebook-first-time)" on Facebook (FB), and Snapchat's new Discover platform (http://blogs.wsj.com/digits/2015/01/27/snapchats-discover-an-internet-portal-for-2015/).
Netflix's plan to expand internationally could help in the short term, but Sena doesn't believe it is a long-term solution to the threat of competition.
"While laudable, we not believe this will do enough to stem competition from a growing number of distributors or materially reduce the risk inherent in original content production," Sena wrote.
-Tomi Kilgore; 415-439-6400; AskNewswires@dowjones.com
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