Jefferies Remains Bearish on Netflix, Inc. (NFLX) Following Un-Grandfathering Survey Results

Jefferies analyst John Janedis provides commentary on shares of Netflix, Inc. (NASDAQ:NFLX) following a proprietary survey that targeted over 1,100 subscribers on the heels of receiving the un-grandfathering/price change notification from the online streaming giant.

Analysis of the results indicate that not only could the price point prove to leave “a larger impact on cancellations,” but the analyst notes meanwhile, “AMZN Prime’s video platform is gaining share.” In reaction, Janedis reiterates an Underperform rating on NFLX with a $76 price target, which represents a 21% downside from where the stock is currently trading.

It is clear to the analyst that the “reaction to Un-grandfathering is mixed,” with 65% of those who responded accepting the price change, 7% cancelling, and 4% who intend to cancel, but have not done so yet. While Janedis notes 24% of respondents are undecided, Janedis assumes that “the vast majority” will renew their NFLX subscriptions.

Based on the timing of when subscribers that were polled received the notification, Janedis asserts, “We expect the ungrandfathering process will conclude in 4Q.”

While some respondents did accept the initial price change, Netflix might not get so lucky if they decide to raise prices by even “another $1 in the next 24 months,” as 16% responded in that scenario, they would then cancel subscriptions in reaction. Additionally, Janedis comments, “70% of this group also indicated that ‘further price increases’ is the most likely factor to motivate cancellation in the future.”

The analyst points to Netflix originals and licensed content as a significant asset, as both those who accepted and rejected the price change deem NFLX’s original content “as the most valued content category on the platform.”

For NFLX’s third-quarter, Janedis forecasts revenue of $2,249 million, EBITDA of $115 million, and EPS of $0.03. For the fiscal year of 2016, Janedis estimates revenue of $8,704 million, EBITDA of $514 million, and EPS of $0.28.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, four-star analyst John Janedis is ranked #944 out of 4,189 analysts. Janedis has a 49% success rate and yields 3.3% in his annual returns. When Janedis recommends NFLX, he earns 1.9% in average profits on the stock.

TipRanks analytics show NFLX as a Buy. Based on 32 analysts polled in the last 3 months, 17 rate a Buy on NFLX, 9 maintain a Hold, while 6 issue a Sell. The 12-month price target stands at $109.08, marking a nearly 14% upside from where the shares last closed.

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