(Adds details; updates shares)
July 22 Netflix Inc's planned expansion
in Europe will set the video streaming company up for growth,
but will increase content and marketing expenses in the near
term, analysts said.
The company's shares were down 4 percent at $433.37 in
morning trading on Tuesday on the Nasdaq. The stock nearly
doubled in the year to Monday's close.
At least 14 brokerages raised their price targets on the
company's stock by as much as $75 to a high of $550 on Tuesday,
a day after the company said profit more than doubled in the
quarter ended June 30.
Netflix said it planned to expand into Germany, France,
Austria, Switzerland, Belgium and Luxembourg in September,
taking its international addressable market to more than 180
million broadband households - double the current U.S. market.
"The launch into the six new European markets appears
costlier than anticipated," Janney Capital Markets analysts
wrote in a research report.
Netflix, which now has over 50 million subscribers, already
has presence in European countries such as the UK, Denmark,
Norway, Sweden and Finland.
The company added 1.12 million customers in international
markets in the second quarter, more than the 570,000 customers
it added in the United States.
Netflix's international business is likely to post losses or
stay in "early-stage margin mode" for the next several years,
RBC Capital Markets analysts wrote in a note.
RBC forecast that longer term, margins in the business would
be similar to that in its U.S. business, which the brokerage
said were 27.9 percent in the latest quarter.
RBC kept its "outperform" rating on the stock and raised its
price target to $530 from $500.
Of the 37 analysts covering Netflix, 18 have a "buy" or a
higher rating on the stock, 14 have a "hold" and 5 have a "sell"
or equivalent rating, according to StarMine data.
"We think Netflix is building an impressive pipeline of
original content over the coming quarters and years, which we
expect will provide a nice tailwind for sub growth both
domestically and internationally," JP Morgan analysts wrote in a
Netflix has invested in original series such as "House of
Cards" and the Emmy-nominated "Orange is the New Black" to beat
competition from Amazon.com Inc and Hulu.
"While we believe in the product and the potential for the
company longer-term, we have reservations on current
expectations and what is implied in the current stock price,"
Barclays Equity Research analysts wrote in a note.
Barclays kept its "underweight" rating and $420 price target
on the stock.
(Reporting by Supantha Mukherjee in Bangalore; Editing by Savio
D'Souza and Kirti Pandey)