Netflix's Subscriber Losses as Disney+ Launches Are 'Manageable,' Analyst Says

Netflix might lose some subscribers as new streaming services like Disney+ launch, but those losses will be contained, bullish Cowen analysts say.
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Netflix investors are watching competition vigilantly as new streaming services from large and powerful players launch, but Cowen analyst John Blackledge isn't too worried, based on the results of a proprietary survey. 

Netflix shares were moving 1.7% higher to $320.86 on Wednesday morning.

Blackledge said in a note that Cowen's own surveys and data shows 1.1 million Netflix users churned, or cancelled their subscriptions, in November after they had signed up for Disney+. 

In November, Disney launched its new service, which goes for $6.99 per month although unlimited Verizon (VZ) - Get Report wireless subscribers could get a free year of the service. Disney+ has an extensive backlog of family-friendly content, but Disney also plans to create a significant amount of original content. Disney boasted 10 million subscribers in November right after it launched. 

But "incremental churn appears manageable," said Blackledge, adding that he expects Netflix to meet or beat its fourth quarter U.S. subscriber guidance, as the quarter's rich content slate should help offset subscriber churn. Similarly, analysts at JPMorgan think the Q4 content, which includes The Irishman, could kickstart the stock, which is up 17% for the year, trailing the broader U.S. market. Analysts are expecting Netflix's Q4 U.S. net subscriber adds to come in at 676,000. 

Blackledge expects full Q4 churn at Netflix to be 1.6 million, but for full year 2019 U.S. paid net sub adds to be 2.3 million. Analyst polled by FactSet are looking for 2.8 million. 

Much of Netflix's future growth will likely come from its international operations, which it gave more details about recently in a new filing. Blackledge remains bullish on Netflix, with a $415 price target on the stock, suggesting 31% upside from here. He's looking for revenue to grow at 13% per year for the next 10 years and for EBITDA to grow 22% as the company works costs down to expand its operating margin. 

For the longer-term, other new streaming players such as Apple (AAPL) - Get Report and Comcast (CMCSA) - Get Report are expected to pour billions of dollars into content, which Netflix investors are eyeing carefully. Netflix bulls say the company can remain competitive with its huge slate of original content and that most subscribers will wind up signing up for multiple services