Wedbush analyst Michael Pachter sheds light on Amazon.com, Inc. (NASDAQ:AMZN) and Netflix, Inc. (NASDAQ:NFLX) after hosting a conference call yesterday with two former content strategy and acquisition executives who have had experience at Netflix, Amazon, and Hulu. In the call, the experts highlighted a progression of content spending coupled with the dynamics of streaming media, indicating a landscape that has seen an evolution of rising competition, cost hikes, and an increase in original, exclusive, and curated content.
Following the call, the analyst rates an Outperform rating on shares of AMZN with a $775 price target. In contrast, Pachter rates an Underperform rating on NFLX with a price target of $45, which represents a 53% downside from where the stock is currently trading.
In light of the two speakers’ insights, Pachter foresees “continued elevated content spending in the near term as Netflix and Amazon compete fiercely with one another and attempt to differentiate their programming and user experience.”
Moreover, “In our view, the offerings reflect Amazon’s determination to take on Netflix in the largely untapped SVOD market. We think that Amazon’s heightened focus on content spending, particularly for original programming, is a shot across Netflix’s bow,” the analyst contends.
Pachter projects AMZN will spend up to $3.5 billion on content this year, but will “grow its spending” by over $500 million on video content annually over the upcoming years.
The analyst assesses, “While Netflix spends nearly double what Amazon will spend this year, Netflix must deliver content to 200 countries compared to Amazon’s five.”
“Amazon has begun to look more compelling on price comparison,” Pachter concludes.
As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks, one-star analyst Michael Pachter is ranked #3,226 out of 4,185 analysts. Pachter has a 50% success rate and faces a loss of 0.7% in his annual returns. When recommending AMZN, Pachter gains 31.2% in average profits on the stock. However, when recommending NFLX, Pachter loses 41.7% in average profits on the stock.