Netflix, Inc. (NASDAQ:NFLX) is expected to post its third-quarter results this Monday. Ahead of earnings, Wedbush analyst Michael Pachter remains bearish on the streaming platform, finding its current valuation “unwarranted” when taking into account negative possible deterrents like a continued downward spiral of domestic growth on top of “consistently elusive” profitability abroad.
Add in rising competition to the mix, and Pachter adamantly reiterates an Underperform rating on NFLX with a price target of $50, which represents a nearly 51% downside from where the shares last closed.
Pachter projects revenue of $2.30 billion and EPS of $0.07, believing NFLX’s quarterly results will outclass guidance. Comparatively, the Street estimates $2.28 billion in revenue, $0.06 in EPS, and $0.05 in guidance. Pachter anticipates streaming subscriber net adds will mirror respective guidance expectations of 300,000 domestic and 2.00 million international. For fourth-quarter guidance, Pachter believes management will cut from 5.59 million last year to 4.75 million subscriber net adds.
The analyst explains his negative sentiment on NFLX shares, asserting, “We think that Netflix’s delay of the price increases scheduled for May created a lingering problem with investors – slowing domestic growth that will likely persist for another quarter as it ‘un-grandfathers’ as many as 15 million more domestic subscribers over the next two months.”
“Additionally, we think that Netflix’s current share price fails to address the potential for meaningful competition from Amazon, which recently launched a video-only subscription option of its own. We acknowledge that Netflix has the much more powerful brand for SVOD, but we are confident that with its new standalone service, Amazon declared war on Netflix,” Pachter concludes, anticipating the giant will “continue to bleed cash for the foreseeable future.”
As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks, one-star analyst Michael Pachter is ranked #3,113 out of 4,182 analysts. Pachter has a 50% success rate and faces a loss of 0.5% in his yearly returns. When recommending NFLX, Pachter loses 42.3% in average profits on the stock.
TipRanks analytics demonstrate NFLX as a Buy. Based on 34 analysts polled in the last 3 months, 17 rate a Buy on NFLX, 10 maintain a Hold, while 7 issue a Sell. The consensus pride target stands at $106.52, marking a 5% upside from where the stock is currently trading.