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A handful of The Street analysts become less optimistic about the actions of the leader in digital on-demand streaming, Netflix Inc. (NFLX), in anticipation of the release of its quarterly quarterly results report, after the closing of markets, Tuesday.
In the second quarter, Netflix disappointed investors with an increase in the number of net subscribers lower than expected, which caused concern over the increased pressures of competition in the streaming sector. demand and slowing growth in the United States, its most profitable market. Last week's massive sell-offs, which disproportionately weighed on America's biggest tech capitals, caused Netflix's stock price, which fell from its peak in July, to fall to more than 20%. Shares of the Los Gatos, California-based company continue to post impressive returns of 76.2% year-to-date, up 3.8% over the same period.
Stronger US dollar, rate rising to drive up the costs of the streaming industry leader
In a customer note released on Tuesday, Morgan Stanley's Benjamin Swinburne became the third-largest street analyst to lower his Netflix stock price forecast, as reported by CNBC. Morgan Stanley's new 12-month target on Netflix shares, which was $ 450, down from the previous forecast of $ 480, is up 33% from current levels.
The analyst attributed lower estimates to higher headwinds, such as a stronger dollar and rising interest rates, which should drive up the entertainment giant's costs.
"In the longer term, we anticipate that Netflix will continue to invest and market behind its growing global original programming and that we will increase long-term marketing spend [as a percent] income by ~ 100 [basis points versus our] Swinburne said the cost of Netflix's additional debt is expected to increase due to rising interest rates. Netflix hopes to obtain additional debt of $ 5 billion over the next two years before reaching positive free cash flow in 2021.
Also on Tuesday, analysts at Deutsche Bank came out with a note that Netflix would deliver results in line with consensus estimates for the third quarter. As for the forecast for the current quarter, Bryan Kraft of Deutsche Bank expects figures "better than expected".
The risk / reward ratio is weighing on the rise in this revenue ratio, "writes Kraft, whose price target of $ 350 on Netflix implies a modest increase of 3.5% over 12 months." That said, we believe that the increase is limited in the short term. "
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