Cantor Fitzgerald Cuts Netflix (NFLX) to Hold
Cantor Fitzgerald downgraded Netflix (NASDAQ: NFLX) from Buy to Hold with a price target of $260.00. Analyst Youssef Squali noted concerns about content cost and international investment.
"Given the lumpiness of content deals, management changed its domestic streaming contribution margin target to +400bps/year, from +100bps/quarter. However, given that 3Q:13 guidance calls for +130bps Q/Q improvement (to ~23.8%), and 4Q:13 is expected to be up ~400bps Y/Y (to 22.5%), this implies a 130bps Q/Q decline in margin, due to stepped-up content spend. Further, plans to grow international investments ahead of revenues and losses from the Netherlands launch should exacerbate content costs near-term," said Squali.
"While Netflix is performing to expectations, we believe that the shares have more than reflected the short-term outlook, at 3.5x revenue and 40.3x EBITDA on FY:13 estimates," he added.
For an analyst ratings summary and ratings history on Netflix click here. For more ratings news on Netflix click here.
Shares of Netflix closed at $264.58 yesterday, with a 52 week range of $52.81-$270.31.
"Given the lumpiness of content deals, management changed its domestic streaming contribution margin target to +400bps/year, from +100bps/quarter. However, given that 3Q:13 guidance calls for +130bps Q/Q improvement (to ~23.8%), and 4Q:13 is expected to be up ~400bps Y/Y (to 22.5%), this implies a 130bps Q/Q decline in margin, due to stepped-up content spend. Further, plans to grow international investments ahead of revenues and losses from the Netherlands launch should exacerbate content costs near-term," said Squali.
"While Netflix is performing to expectations, we believe that the shares have more than reflected the short-term outlook, at 3.5x revenue and 40.3x EBITDA on FY:13 estimates," he added.
For an analyst ratings summary and ratings history on Netflix click here. For more ratings news on Netflix click here.
Shares of Netflix closed at $264.58 yesterday, with a 52 week range of $52.81-$270.31.