More bad news is plaguing Netflix (NFLX), sending its stock cratering to its lowest point of the year. Investors and some key analysts are increasingly warning that the streaming giant faces strong headwinds over growing costs and competition.
Pivotal Research Group cut its price target for the Netflix stock on Tuesday to $350 a share, from $515. In a note to clients, analyst Jeffrey Wlodarczak citied “material accelerating content costs,” new “aggressive moves” by competitors like Apple, and worries that third-quarter subscriber growth could be “weaker than expected.”
On Monday, analyst Andy Hargreaves at KeyBanc Capital Markets expressed concern that third-quarter results likely won’t “address competitive concerns” that will come to the forefront in Q4. That’s when new streaming services from Apple (AAPL), Disney (DIS) and AT&T’s (T) WarnerMedia are expected to launch.
“There’s a battle for subscribers and I think Netflix is bearing that right now,” Victoria Fernandez, chief market strategist at Crossmark Global Investments, told Yahoo Finance’s “The First Trade.”
“When you look at a name like Netflix, so much of that is idiosyncratic right now because of the competition that’s coming out on streaming,” she said. “We’ll see what happens on earnings when we get those actual subscriber numbers.”
Netflix shares fell 4% on Tuesday and more than 13% over the last five days – and have completely erased the 46% gain from earlier this year.
Netflix got a big boost back in January when it raised prices by up to 18%. It likely won’t be able to go back down that road in November, with its streaming rival Disney offering the Disney+ service for as low as $6.99 a month. Apple TV+ will be free for the first year for those who buy certain new hardware, and will cost $4.99 a month for everyone else.
“Even good results are unlikely to address competitive fear,” KeyBanc’s Hargreaves wrote in his note. “Weak results/guidance in 3Q could raise concerns about longer-term growth that would likely be negative for the stock.”