October 17, 2018 / 12:34 PM / a year ago

Netflix: Top analyst downgrades citing limited margin expansion

FILE PHOTO: The Netflix logo is seen on their office in Hollywood, Los Angeles, California, U.S. July 16, 2018. REUTERS/Lucy Nicholson/File Photo

** Keybanc Capital markets downgrades its rating on Netflix (NFLX.O) to “sector weight” from “overweight” citing limited investment efficiency, margin expansion and ancillary opportunities for co over the next year

** Keybanc analyst Andy Hargreaves says the streaming giant’s margin expansion has not developed at a pace that exceeds its expectations, which suggests upside is more limited

** On Tuesday, Netflix said hooked 7 mln new streaming subscribers from July to September, a third more than Wall Street had expected

** However, it also said it expects operating margins at the lower end of the 10 pct to 11 pct range for FY 2018

** Ancillary opportunities to build revenue in consumer products, advertising, broad theatrical releases and mobile-only subscriptions will take several years to develop and are offset by medium-term risks associated with rising interest rates and competition - Hargreaves

** Netflix faces competition from deep-pocketed cos such as Amazon (AMZN.O) and new streaming services from Walt Disney Co (DIS.N) and AT&T Inc (T.N) that are expected late next year

** Hargreaves is rated 5/5 stars for his recommendation on stock, he estimates NFLX’s fair value at $377

** Stock was up 11.1 pct at $385 premarket

Reporting by Derek Francis in Bengaluru

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below