Wall Street raises targets, but Netflix shares dive

LOS ANGELES Tue Jul 26, 2011 12:44pm EDT

A screen grab shows the access to Netflix online, as displayed on a television screen, in Encinitas, California July 25, 2011. REUTERS/Mike Blake

A screen grab shows the access to Netflix online, as displayed on a television screen, in Encinitas, California July 25, 2011.

Credit: Reuters/Mike Blake

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LOS ANGELES (Reuters) - Shares of top video rental company Netflix Inc fell more than 9 percent on Tuesday, a day after the Wall Street darling shocked investors by projecting a pause in its normally explosive subscriber growth.

Several analysts, however, accepted the company's view that the slowdown in new customers would be a temporary reaction to an unpopular price increase announced this month. Analysts at Jefferies, Wedbush and Credit Suisse raised their price targets for Netflix shares.

Expected cancellations from the higher prices "will be more than offset" in the fourth quarter by a gain in average revenue per user, Credit Suisse analyst John Blackledge said in a research note.

He raised his price target to $310 from $280. "We view weakness on the results as a buying opportunity," he said.

Netflix shares were at $255.19 in late morning trading on Nasdaq, a 9.3 percent drop.

Netflix said on Monday it would essentially end the third quarter with the same number, or slightly more, subscribers as at the end of the second quarter. The company said it expected cancellations following a vocal backlash over a price increase as high as $6 a month for some customers.

Barclays analyst Anthony DiClemente lowered his Netflix price target to $285 from $315, but reiterated an "overweight" rating and urged investors to "take advantage of any weakness."

Netflix "continues to execute very well," he said, adding he was optimistic about plans to expand to Latin America and another market early next year.

(Reporting by Lisa Richwine, editing by Maureen Bavdek)

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Comments (1)
socratesfoot wrote:
If you have Netflix, use Redbox, Hulu, or some other service for as long as it takes. Get this guy fired. Already planning to cancel my service personally. I’m sure many will just download illegally too. When prices are set higher than the market will bear, people find other methods to get services. Netflix streaming service didn’t have any new movies anyway, just a bunch of old stuff most of us can see on STARS with cable. Just one more greedy movie company.

Jul 26, 2011 3:32pm EDT  --  Report as abuse
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