Get 40% Off
🚀 Our AI Picked 6 Stocks that Jumped +25% in Q1. Which Picks Will Soar in Q2?Unlock full list

Netflix stock falls as Citi cuts rating on 'lofty' expectations

Published 01/09/2024, 05:33 AM
Updated 01/09/2024, 05:35 AM
© Reuters Netflix (NFLX) stock falls as Citi cuts rating on 'lofty' expectations

Citi strategists lowered their rating on Netflix (NASDAQ:NFLX) today, causing shares to fall about 2% in pre-market trade.

The streaming giant stock’s rating is cut from Buy to Neutral with analysts citing “lofty expectations.” Concerns are raised regarding the optimistic expectations for Netflix in both 2024 and 2025.

“On almost every metric, the Street expects robust results over the next two years: 1) accelerating revenue growth, 2) EBIT margin expansion to new highs, 3) muted increases in content spending, 4) robust FCF, and 5) large share repurchases,” analysts said in a client note.

“In short, we believe expectations are high.”

Analysts also highlighted three specific risks they see: 1) Lower revenues, 2) higher cash content costs, and 3) potential M&A.

Regarding the third risk, analysts acknowledge that Netflix hasn’t pursued large-scale M&A historically.

“However, if Street estimates are accurate and if the firm does not buy back significant stock over the next two years, it will have more than $8 billion of net cash on the balance sheet by 2025, giving the firm ample capacity to pursue M&A.”

“We believe the most likely target is a video game publisher with a robust portfolio of IP.”

Based on these risks, Citi says it “no longer find the riskreward compelling,” hence today’s downgrade move.

Analysts maintained a $500.00 per share price target on NFLX stock, which suggests potential upside of about 3% based on Monday's closing price.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.