Netflix shares could fall on streaming competition
Analyst: Company's subscriber growth might slow due to Hulu, YouTube
By Danny King -- Video Business, 4/21/2009
APRIL 21 | Netflix shares could fall as much as 30% as subscriber growth stemming from its "Watch Instantly" video-streaming service might be slowed by competing services from Google's YouTube and the News Corp.- and NBC Universal-owned Hulu, an analyst said today.
Lazard Capital Markets analyst Barton Crockett wrote in a note to clients today that Netflix investors should sell the stock because it's worth about $34 a share, far less than yesterday's closing price of $49.61. Crockett became the second analyst out of the 20 who rate the company to give it a "sell" rating, according to Thomson Reuters.
"Improvements in the Fox/NBC Hulu service, new and emerging Google/YouTube efforts and likely improvements in other online video services we believe will lessen the appeal of Netflix Watch Instantly, slowing subscriber growth at a time when tougher comparisons are also a headwind," Crockett wrote, citing YouTube's announcement last week that its television-show and movie-service includes partners such as Sony, CBS and MGM.
Netflix, which reports earnings later this week, has been augmenting its DVD-by-mail service with its video-streaming product and reached agreements last year to make its digital titles available for streaming through components such as Microsoft's Xbox 360 videogames consoles, TiVo digital video recorders and Blu-ray Disc players from Samsung and LG Electronics.
The company, which has estimated that subscribers for its DVD-delivery service will peak between 2013 and 2018, pegs its digital inventory at more than 12,000 titles, though blog HackingNetflix.com said last week that the number might be closer to 15,000.
Last week, Wedbush Morgan analyst Michael Pachter forecast that Netflix would boost spending on its video-streaming operations this year by more than 30% to about $100 million as it widens its inventory of digital titles, while likely arranging for more components to be able to play them on televisions. Pachter also downgraded the stock to "hold" from "buy," citing its recent increase in price.
As of yesterday, Netflix shares surged 66% this year, compared with a 2% increase for the Nasdaq Composite Index. Netflix shares fell 6% today.
