Netflix stock price target slashed to $300 vs. $380 at Evercore as competition looms
Netflix Inc. shares were flat Monday, after Evercore slashed its stock price target to $300 from $380 and said questions about the company’s business model are mounting ahead of the arrival of several new streaming services that are expected to create serious competition. analyst Vijay Jayant reiterated an in-line rating on the stock and said the narrative around the company has turned negative in the last few months. Shares have fallen almost 30% from the period just before the company’s second-quarter earnings in July. "With net subscriber additions potentially peaking this year, and ahead of a number of new Internet TV service launches from well-capitalized competitors over the coming months, questions about the company’s business model now abound," Jayant wrote in a note. "Has Netflix set a deflationary standard for the industry by spending so aggressively on content while allowing user behaviors like frictionless disconnections (churn), binge-watching and password-sharing which create difficulties in managing a profitable subscription business at scale?" the analyst asked. Evercore is expecting Netflix to remain the leader in Internet TV for years to come, but acknowledged that investors are concerned about a potential "race to the bottom" if competitors like Disney and Apple succeeded in deflating the value of a content offering. "Longer-term, we will only find out in time whether or not content is truly a scalable, ‘fixed’ cost." the analyst wrote. Netflix shares have gained 2% in 2019, while the S&P 500 SPX, -0.31% has gained 18%.
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