Earlier this year, the streaming giant expected to make a mark by recording stock market highs. Now, that seems to be a distant goal.
The shares of Netflix are at present down in 2019, after rising more than 40 percent through the first four months of the year, reports "hollywoodreporter.com".
On Tuesday, a Wall Street analyst reduced his target price "substantially" to $350 while it had been set at $515.
Growing competition seems to be the reason behind the downward spiral. Jeff Wlodarczak of Pivotal Research said his "less-bullish" view points at competition from Amazon Prime Video, Hulu, the upcoming Disney+ and Apple TV+ and others.
Upcoming streaming services are bidding the price of content ever higher. For instance, AT&T secured rights to re-runs of "The Big Bang Theory" for about $600 million for its HBO Max service. Before this, Netflix had secured "Seinfeld" for $500 million-plus after it lost "Friends" and "The Office" to higher bidders.
Acquiring good content can no longer remain the only focus. According to the analyst, Netflix has to contend with the fact that competitors are advertising their services, too.
"Against this backdrop of accelerating industry spend, we believe the right move for Netflix management is to also materially accelerate their spend," says the analyst, adding that margins and free-cash flow will take a hit in that case.
Netflix shares were trading four per cent lower on Tuesday, to $255. Wlodarczak still sees the stock rising 37 per cent over the next 12 months.
"With the recent significant stock pullback, sentiment in Netflix is awful, setting the stock to potentially climb a wall of worry around the launch of Disney+, which we view as more of a threat to pay TV than Netflix," says the analyst.
On Monday, Wells Fargo initiated coverage of Netflix, which highlighted a relatively lowly "market perform" rating and $288 price target.
Back in July, Netflix had revealed that it lost US streaming subscribers in the second quarter for the first time in its history.
( With inputs from IANS )