A growing number of analysts are worried that Netflix’s momentum could slow down amid competition from other platforms in the streaming wars.
September saw Jeff Wlodarczak lower his price target by a third, down to $350 , saying saying that ‘sentiment [about the stock] is awful.’ Similarly, UBS AG and Goldman Sachs Group Inc have also slashed their expectations.
Since mid-July, investors have watched Netflix stock fall by 23 per cent after failing to meet its own guidance forecast for the second quarter by a fairly large margin. Although the recent price increase was attributed as a key cause by many analysts, another worrying factor was – and still is – competition on the horizon from contenders such as Walt Disney Co, Apple Inc, AT&T Inc and Comcast Corp.
This means Netflix investors will be feeling the heat ahead of the upcoming third quarter results due to be released by the media giant, where the final report ahead of the Disney+ and Apple TV+ service debuts will be revealed.
In July, Netflix estimated that 7 million net adds would join the service in the timeframe, but Wlodarczak said that data services used by investors predict a lower number will sign. He went on to say: ‘People are expecting them to miss. I can’t recall Netflix ever missing two quarters in a row.’
Netflix experienced huge success with its early series, which convinced investors that it was ahead of the game when it came to a new era of watching on demand content over the internet instead of using traditional cable or satellite services.
In recent times, Netflix has spent increasing amounts of money on movies and TV shows, with an estimated $15 billion spent this year. The company’s debt has also ballooned from $500 million to around $13 billion.
With Netflix still spending a lot of money and earning less than its peers in the industry, investors are worried about the company being able to sustain the same amount of growth – and with new competition coming, those worries are multiplied.
