Netflix reports earnings after the close today and the Street is looking for another blowout quarter in terms of subscriber growth. Even the bears expect strong numbers, but those street analysts who have the courage to think long-term (there’s only one or two) see challenges in the long-run. As Barron’s reports, the analyst from Webush sees changes in the competitive marketplace that could shake up subscriber loyalty.
To wit:
Changes in the competitive marketplace could shake up subscriber loyalty. “The combination of less content from Disney (DIS) (pulling the majority of its newer content at the end of 2018) and a steady migration of Comcast (CMSCA), Time Warner (TWX), and 21st Century Fox (FOXA) content toward exclusive deals with Hulu will ultimately lead to lower subscriber satisfaction,” they wrote.
The Barron’s Next 50 company might need to charge more. “Assuming free cash flow continues to come in at negative $3—4 billion for the foreseeable future, and further assuming that creditors insist that Netflix generate sufficient positive free cash flow to pay back its debt in 5 years, it is likely that monthly pricing would have to rise significantly in order to satisfy creditors,” the analysts wrote.
Webush has a price target of $110 per share on Netflix versus a current price of $311, but don’t expect that target to be hit in the next quarter or two.
Read more here.