A New Netflix-Hater Comes To Town (NFLX); Gabelli & Company Says "Sell"
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Price: $613.48 -0.03%
Rating Summary:
43 Buy, 27 Hold, 4 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 16 | Down: 14 | New: 16
Rating Summary:
43 Buy, 27 Hold, 4 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 16 | Down: 14 | New: 16
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This morning, another Wall Street firm threw its hat into the "I-Hate-Netflix (Nasdaq: NFLX) camp."
Gabelli & Company started coverage on the hot online video rental company with a dreaded "Sell" rating, in a report entitled "Over-The-Top Valuation."
"Despite a history of operational excellence and a superior management team, we see significant risks for Netflix's business and believe the stock does not provide an adequate margin of safety at current prices," the firm stated.
The firm states MVPDs deliver a much larger choice of content than Netflix. Increased deployment of advanced television services such as video-on-demand and authenticated video service/"TV Everywhere" could decrease the demand for Netflix's product.
With Netflix accounting for 25-30% broadband data usage during primetime, usage based based pricing of broadband, expected to be permitted by the FCC, may increase the total cost of a Netflix subscription to its customers, Gabelli also notes.
Interested cost for content is also a major worry. In August, Netflix agreed to pay $900 million over the course of five years to gain access to Epix's content. Netflix's agreement with STARZ will be renegotiated in 2011 which will likely result in increased cost. The firm also expects that the prices of existing content will increase as Netflix subscriber base increases
On its valuation, the firm notes Netflix trades at a premium valuation of 24x and 48x 2011 EBITDA and EPS, respectively. Based on the firm's model which calls for Netflix to add an additional 23 million subscribers by 2014, the firm does not expect the company's earnings power to justify a valuation meaningfully in excess of the current stock price.
Gabelli & Company started coverage on the hot online video rental company with a dreaded "Sell" rating, in a report entitled "Over-The-Top Valuation."
"Despite a history of operational excellence and a superior management team, we see significant risks for Netflix's business and believe the stock does not provide an adequate margin of safety at current prices," the firm stated.
The firm states MVPDs deliver a much larger choice of content than Netflix. Increased deployment of advanced television services such as video-on-demand and authenticated video service/"TV Everywhere" could decrease the demand for Netflix's product.
With Netflix accounting for 25-30% broadband data usage during primetime, usage based based pricing of broadband, expected to be permitted by the FCC, may increase the total cost of a Netflix subscription to its customers, Gabelli also notes.
Interested cost for content is also a major worry. In August, Netflix agreed to pay $900 million over the course of five years to gain access to Epix's content. Netflix's agreement with STARZ will be renegotiated in 2011 which will likely result in increased cost. The firm also expects that the prices of existing content will increase as Netflix subscriber base increases
On its valuation, the firm notes Netflix trades at a premium valuation of 24x and 48x 2011 EBITDA and EPS, respectively. Based on the firm's model which calls for Netflix to add an additional 23 million subscribers by 2014, the firm does not expect the company's earnings power to justify a valuation meaningfully in excess of the current stock price.
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