Concerned about the streaming behemoth's high valuation after a nearly 90% rise this year, Loop Capital downgraded Netflix (NFLX, Financials) from "buy," to "hold." The company thinks Netflix's price has already factored in most of its recent growth drivers, therefore restricting any potential even with high subscriber activity and content releases.
Reflecting a meager 3.4% increase from current trade levels, the company maintained its $950 price objective. With an increase of 27% this year, Netflix shares have well exceeded the more general S&P 500. Strong content performance, price consistency, and expansion in its ad-supported tier have all helped to fuel the increases.
With blockbuster releases like Squid Game Season 2 and live NFL broadcasts, Netflix is likely to attract significant audience in the next weeks. Loop Capital's analysts believe that the week ending December 29 might show record-breaking viewership figures, therefore highlighting the company's capacity to inspire interaction.
The company cited Netflix's choice to preserve its $15.49 monthly pricing for its U.S. basic tier for over three years, therefore maintaining it cost-competitive against competitors such as Disney+ and Max. Loop Capital did note, meanwhile, that Netflix's projected price-to-earnings ratio of 36 stands much above both historical norms and more general market levels.
Although Netflix's advantages—content pipeline, paid-sharing program, advertising approach—have helped to enhance its market position—they are now essentially priced into the stock, the company claimed. As streaming services fight for consumer expenditure, rising competition from Disney (DIS, Financials) and Warner Bros. Discovery (WBD, Financials)—which have instituted price increases and bundling tactics—is expected to raise pressure.
Exceeding estimates, Netflix revealed in the third quarter 8.5 billion in revenue and 8.76 million net subscriber additions. Closely monitored for revenue growth, subscriber patterns, and advertising success will be the company's forthcoming fourth-quarter earnings in January.
The downgrading of Loop Capital reflects more general worries about streaming valuations and doubts about Netflix's capacity to maintain pace in face of macroeconomic uncertainties and competitive obstacles. Monday trading showed Netflix's shares up 0.2% to $921.08.
