Four-star-rated analyst David Joyce at Seaport Research Partners downgraded Netflix’s (NFLX) stock from Buy to Hold, citing doubts about the the streaming giant’s ability to quickly deliver on its long-term growth plans. In a note to clients, the firm said Netflix “needs time to execute” on expectations related to advertising, content aggregation, launching new user experiences, and regaining market share. Additionally, Joyce stated that a lot of long-term opportunity is already priced into NFLX stock. Year-to-date, NFLX stock has gained over 45%.
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The downgrade comes ahead of the company’s Q2 earnings report, scheduled for July 17.
Seaport Sees Limited Upside in NFLX Stock
Seaport expects Netflix to raise prices globally through 2030. It also boosted its estimate for ad revenue by about 40%, going above Netflix’s own $9 billion target for that year. Moreover, the firm raised its profit margin forecast for Netflix, saying the company could save money by acting as an aggregator. By doing so, the company can make smart distribution deals instead of fighting to buy expensive content rights, like those for major sports events such as NFL games.
However, despite these positive long-term adjustments, Seaport noted that the average of their estimates points to less than 10% upside from current levels. This limited potential prompted the downgrade to Hold. The firm also highlighted Netflix’s elevated price-to-earnings ratio of over 60 and its current premium to fair value as reasons for a more cautious outlook.
Is NFLX a Good Stock to Buy?
Turning to Wall Street, NFLX stock carries a Strong Buy consensus rating. Among the 37 analysts covering the stock, 28 have issued Buy recommendations, and nine rate it as Hold. Moreover, the Netflix stock price target of $1,267.50 implies a downside of 2.29% from the current trading level.
