Benchmark analyst Matthew Harrigan on Tuesday reiterated his sell rating on Netflix (NFLX) - Get Report and $412 stock price target amid what he sees as waning interest in the streaming content provider’s lineup in 2021 despite ongoing pandemic-induced stay-at-home orders that continue to propel consumers to the small screen.
In a research note to clients, Harrigan said he doesn't expect any upside surprises for member growth in the fourth quarter or through 2021, in large part because global subscriber growth already has become ubiquitous, evidenced by a steep slowdown in new subscribers in the third quarter and wide miss on earnings forecasts.
"Netflix's trading correlation with other prominent Nasdaq 100 and FAAMG names has now clearly broken down as 1) confidence in its streaming exceptionalism is fading somewhat even as 2) the stay-at-home trade may be "very 2020" even with some concern over how U.K. and South African virus mutations could affect Covid-19 vaccine efficacy," Harrigan wrote.
"This is albeit with international sales and operating profit translation benefiting from ongoing U.S. dollar weakness," Harrigan said. The analyst also pointed to heightened competition from successful new competitors, including Walt Disney’s (DIS) - Get Report Disney+, Apple’s (AAPL) - Get Report Apple TV+ and Telecom giant AT&T's (T) - Get Report HBO Max.
Netflix in October reported third-quarter revenue of $6.44 billion and earnings of $1.74 a share, below analysts’ forecasts of revenue of $6.38 billion and earnings of $2.13 a share. The company added 2.2 million paid subscribers in the quarter, missing its own guidance of an expected 2.5 million new subscribers and below the 10.1 million new subscribers it signed up in the June quarter.
Netflix shares were up 1.12% at $528.70 in premarket trading. The stock has gained more than 60% over the past 12 months vs. a 14% gain for the S&P 500.