Netflix (NFLX, Financial) recently announced its third-quarter results, surpassing expectations and boosting its stock price, which has bolstered investor confidence. Despite these favorable outcomes, Citigroup maintains a neutral stance on Netflix shares. Managing Director Jason Bazinet expressed caution about the ongoing bull market shift, noting that as the stock's valuation multiples expand rapidly, the requirements for sustaining the bull market increase.
Bazinet explained that the acceleration of revenue growth typically accompanies such valuation expansions. However, Netflix's revenue growth is decelerating, with this year's growth at 15% and projections for next year between 11% and 12%.
The analyst also pointed out that another area of concern is the growth in user engagement. While Netflix reports a 1% increase in engagement, the substantial investment in content has not yielded a corresponding deepening of user interaction. Bazinet emphasized that it is less about the amount spent and more about whether Netflix is investing wisely to enhance consumer engagement and potentially justify future price increases.
