Netflix's stock keeps falling, as previously most bullish analyst slashes target by 32%

Shares of Netflix Inc. (NFLX) dropped 2.4% toward a nine-month low in morning trading Tuesday, after Pivotal Research analyst Jeff Wlodarczak slashed his price target by 32%, citing concerns over a "slower path to profitability." Wlodarczak, who was previously the most bullish on Netflix (NFLX) of the 40 analysts surveyed by FactSet, reiterated his buy rating he's had on the stock for at least the past three years but cut his target to $350--32% above Monday's closing price--from $515. He said his new target reflects "materially higher than forecast content cost inflation," which is highlighted by what AT&T Inc. (T) paid for the exclusive rights to "The Big Bang Theory" ( story/how-hbos-big-bang-theory-deal-compares-to-seinfeld-and-the-office-2019-09-17); the significant ramping of advertising spend by big internet players, highlighted by ads seeing during the Emmy award show over the weekend; and the belief that Netflix (NFLX) management will acknowledge they have to "materially accelerate their spend" to keep its lead, which could temporarily pressure margins and free cash flow. Wlodarczak said the good news is that the recent selloff in the stock--13% amid a 5-session losing streak ( 500-decliners-as-streaming-competition-heats-up-2019-09-20)--suggests investor sentiment is now "awful," which sets the stock to "climb a wall of worry" around when Walt Disney Co.'s (DIS) Disney+ service launches. The stock has dropped 30% over the past three months through Monday, while the S&P 500 has gained 2%.

-Tomi Kilgore; 415-439-6400;

  (END) Dow Jones Newswires
  09-24-19 1423ET
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