Goldman Sachs Throws In the Towel on Netflix (NFLX); Downgrades to Neutral

October 25, 2011 8:16 AM EDT
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Price: $132.89 --0%

Rating Summary:
    33 Buy, 22 Hold, 10 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 9 | Down: 12 | New: 44
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Another major Netflix (NASDAQ: NFLX) bull has thrown in the towel after horrible Q3 results and Q4 guidance from the streaming video and DVD rental provider.

Goldman Sachs downgraded shares of Netflix from Buy to Neutral with a price target of $75 (down from $200), saying the earnings trajectory has deteriorated.

The firm noted that while Q3 subscribers were in-line with what they were looking for, Q4 subscriber guidance was disappointing as the number of hybrid subs is falling off more quickly than anticipated.

While 2012 expectations have now been reset, there is a low level of visibility into EPS growth going forward and the firm does not see a clear catalyst to drive the shares higher.

Goldman sees no proactive plan to win back subs or brand.

"We are disappointed that management is sticking with the "if [we] build it, [they] will come" stance, assuming that consumers will soon forget about the price increase," said analyst Ingrid Chung.

Chung also said the UK launch clouds EPS outlook.

"We are disappointed that Netflix chose the UK as its next market launch given the high level of existing competition and the lack of available content there," she continued.

For more ratings news on Netflix click here and for the rating history of Netflix click here.

Shares of Netflix closed at $118.84 yesterday.

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