Shares of Netflix (NFLX) - Get Report traded lower on Friday after receiving an out-of-the-gate downgrade from analysts at Benchmark, who despite the streaming content provider’s unbridled ‘Tiger King’ success see the company’s recent stock-price surge as “excessive.”
In a research note to clients announcing initiation of coverage on the stock, Benchmark analyst Matthew Harrigan came out with a sell rating and a one-year price target of $327, roughly 25% below the stock's current price.
Shares of Netflix were down 1.75% at $431.49 after ending the trading day Thursday up 2.91% at $439.17.
"Our cautious view is based on our belief that the shares already reflect a 'lazy long' halo from the perception of a Covid-19 safe haven," Harrigan wrote, adding that even with high customer additions and lower churn, mounting competition and potentially restricted pricing power bode ill for Netflix’s longer-term earnings.
Indeed, a return to normal activity for the world combined with starker economic realities that prompt consumers to cut back on non-essential services like streaming will be challenges for Netflix, as will increased competition from the likes of Disney+ (DIS) - Get Report, Comcast's (CMCSA) - Get Report Peacock, and HBO Max from AT&T (T) - Get Report, which is expected to launch next month.
At current valuations, the stock “fully recognizes its global streaming leadership and the pop culture appeal of transient hits like ‘Tiger King,’” Harrigan said.
Other analysts disagree. Bernstein's Todd Juenger earlier this month wrote his own assessment of Netflix, concluding the Los Gatos, Calif., streaming-media giant will benefit from the ongoing shelter-in-place measures by the coronavirus pandemic.
"[As] an increasing number of people experience Netflix, at an especially high rate of usage, they will be loath to go back to life without it," Juenger said after raising his price target on the company to $487 a share from $423.
"[One] of the lasting cultural impacts of the Covid-19 crisis will be to accelerate the adoption of streaming video, and further ingrain it into the culture."
Shares of Netflix are nearly 50% up from their March low; they closed at a record on Thursday.