Netflix, Inc. (NASDAQ:NFLX) is set to deliver its fourth-quarter financial print on January 18th after the close. Though Wedbush analyst Michael Pachter believes the online streaming giant will meet expectations for its fourth quarter earnings, its first quarter guidance for 2017 presents a glaring “risk.”
As such, the analyst remains steadfastly bearish, reiterating an Underperform rating on shares of NFLX with a $60 price target, which represents a close to 54% downside from where the stock is currently trading. In fact, Pachter highlights a real possibility for shares to trade lower once first-quarter guidance is released for this year.
Ultimately, “We continue to believe that Netflix is overvalued. Netflix continues to burn cash to fund its acquisition of original and exclusive content, while international profitability remains elusive and competition for both content and subscribers is becoming more fierce. Cash burn is accelerating, and we remain skeptical that the company’s content library justifies its high level of spending. We think that Netflix’s current share price reflects limited competition from Amazon, which recently expanded internationally; in order to compete, Netflix must either spend more or see its international subscriber growth slow. While we expect higher spending, Netflix’s international growth could slow by roughly 2 million in 2017,” Pachter surmises.
Considering the giant’s prospective deceleration of domestic growth that continues to spiral downward along with its “consistently elusive” international profitability, with rising competition at hand, the analyst questions NFLX’s long-term potential.
As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks, Michael Pachter is ranked #4,029 out of 4,351 analysts. Pachter has a 49% success rate and faces a loss of 3.5% in his annual returns. When suggesting NFLX, Pachter loses 47.0% in average profits on the stock.
TipRanks analytics reveal NFLX as a Buy. Out of 35 analysts polled by TipRanks in the last 3 months, 19 are bullish on Netflix stock, 12 remain sidelined, and 4 are bearish on the stock. With a loss potential of 2%, the stock’s consensus target price stands at $127.39.