Should Netflix Show Us The Money?
In a report published Tuesday, Barclays analyst Paul Vogel stated that Netflix, Inc. (NASDAQ: NFLX) is a "great company" but its low profit per customer generates real risks to bullish expectations for the stock.
According to Vogel, Netflix only generates $100 per subscriber in annual revenue and $30 a year in profit in the U.S., while the company's profit is negative internationally. The analyst said that the company's stated goal of expanding into all possible markets by the end of 2016 creates an unfavorable outlook.
Vogel continued that Netflix's ramp overseas may be slower than expected and International margins will be "depressed" for years due to increased spending. As such, shares are fairly valued at current prices, according to the analyst.
"We believe there is potential for Netflix to add subscribers at a rate greater than previously anticipated by the Street (largely thanks to all of their International launches), but are less positive on this increased revenue ultimately filtering down to the bottom line due to the costliness of said rollouts," Vogel wrote. "We were originally looking for profitability in the International segment by 2016-2017, but our analysis suggests that they may not achieve that milestone until several years later. While we believe there is upside to domestic pricing in the short to medium term, this may not be enough to overcome the risks to growth for the name."
Shares remain Equal-Weight rated with a price target raised to $450 from a previous $400 to reflect an approximate 3.5x Sales multiple to 2016 estimated revenue of $8.1 billion.
Latest Ratings for NFLX
|Oct 2016||SunTrust Robinson Humphrey||Maintains||Hold|
|Oct 2016||Credit Suisse||Maintains||Neutral|
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