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Netflix spends at a high rate and the return on its investments may not materialize soon.
That's what KeyBanc's analysts are saying, which downgraded the video provider from overweight to the industry, beyond the outstanding results that sent stocks.
NFLX, + 3.98%
soaring 11% Tuesday night in pre-commercial trade.
Netflix has no problem in increasing its number of subscribers, but "substantial potential" for equities here will require further revenue growth and accelerated profits, which will not hurt. was not as fast as the entertainment giant hoped, said Andy Hargreaves and a KeyBanc team. in a note to customers.
"We maintain a favorable view of Netflix's strategic positioning, but we believe that an improvement in the effectiveness of the investment or significant ancillary opportunities are needed to improve performance relative to current levels. We also do not plan for next year, "said a team of KeyBanc analysts. by Andy Hargreaves.
Netflix added a net total of 6.96 million subscribers in the third quarter, exceeding expectations, following the lack of results in the second quarter, which drove the stock down in July. Los Gatos, California, is seeing more and more subscribers boarding in the fourth quarter. But it also intends to maintain its spending rate, say KeyBanc analysts, which provide a free cash flow of about $ 3 billion for 2018.
Lily: Netflix drops freeloaders from subscriber forecasts after volatile stocks move
"We are convinced that Netflix's leading position in subscription video offers long-term revenue-generating opportunities for consumer products, advertising, large-format theatrical releases and mobile subscriptions only," they said. said Hargreaves and his team. But these opportunities could take "several years to develop" and are threatened by rising interest rates and increasing competition over the next year.
Netflix shares have climbed 80% this year, making it the fourth best performing stock among the S & P 500 constituents
SPX, + 2.15%
The company, led by Reed Hastings, also outperformed a group of high-tech, Internet-related stocks known as FAANG – Facebook Inc.
FB + 3.43%
Apple Inc.
AAPL, + 2.20%
Amazon.com Inc.
AMZN, + 3.35%
and Google Inc. Alphabet
GOOGL, + 2.78%
Raymond James and Goldman Sachs have recently reduced their price targets, citing investor concern over rising interest rates and trade tensions. However, they were optimistic about Netflix's long-term prospects, while Citigroup forced Netflix to buy neutral on Friday, saying the two-day market bust of last week was a chance to resume equities.
Even after the summer results that pulled stocks down, Wall Street analysts broadly supported Hastings' streaming video provider, including KeyBanc, although they lowered their stock price target to $ 375.
"Given our positive and ongoing view of the business, a decline in stock price or evidence of improved investment efficiency would likely prompt us to take a more forward view." positive share, "said analysts.
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