Macquarie Downgrades Netflix As Competition Looms

While investors appear to remain stoked about Netflix Inc.'s NFLX third-quarter earnings beat and subscriber growth, Macquarie downgraded the stock, saying growth was good, but it can't go on forever in the face of all the new streaming competition that's coming.

The Analyst

Macquarie's Tim Nollen downgraded the stock from Outperform to Neutral and lowered the target price from $375 to $325.

The Thesis

Nollen appreciates Netflix taking on marks of a "quality growth company," and acknowledged its impressive revenue and earnings growth. But there are others getting into the streaming game.

With the addition into the space of Walt Disney Co DIS's Disney+ and others, Nollen thinks it will be hard for Netflix to grow much more in the United States. He also thinks pricing power is limited, just as content and marketing costs will have to go up. The turn to positive free cash flow will take years, he said.

Nollen lowered U.S. subscription growth forecasts, now expecting low-single digit growth in 2020 and flatlining around 65 million in 2022. International subscription growth should be more robust, though.

"We still think its opportunity is excellent, especially internationally where sub adds should continue to step up," Nollen wrote in a note. "But it’s hard to deny the US is maturing. It’s neither inflecting up nor down, hence we turn Neutral."

Price Action

Investors remained bullish, with Netflix shares trading up 3.7% on Thursday to $296.94.

Related Links:

Netflix Trades Higher After Q3 Earnings Beat, Subscriber Growth

Mark Cuban Still Long Netflix After Q3 Earnings

Posted In: MacquarieTim NollenAnalyst ColorEarningsNewsDowngradesPrice TargetAnalyst Ratings

Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.

All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.

Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.

Rate collection and criteria: Click here for more information on rate collection and criteria.