Netflix stock dropped last week by 3.4 percent. This comes even after it was announced that the streaming service will be coming to Comcast.
Deadline reported that Jefferies Equity Research's John Janadis slashed the target Netflix stock price by a third to $80. Apparently, the problem is that the streaming service's rivals, such as Amazon and Hulu, are overtaking Netflix and are "becoming more potent."
"It will take longer than expected for [Netflix] to reach the long term targets set for the U.S. streaming business," he said.
Janedis added that Netflix's plan to spend $5 billion on programming this year and $6 billion in the next would result to the company losing $1 billion a year in cash. There is also the possibility of an increase in the risks of a flop since major content owners are reportedly saving their best shows for its rivals or their own sites.
Apparently, Netflix's efforts to gain more overseas subscribers will be "more modest than consensus expectations" as it struggles with "local players (which carry more local content), language barriers, underdeveloped infrastructure in emerging markets, and an expensive price point, among other cultural challenges specific to individual countries."
According to the Wall Street Pit, Netflix stock could drop by about 40 percent from its current levels based on different factors such as its price-to-earnings ratio and market share. "At 97 times [forward] earnings, Netflix shares are more sizzle than steak, and that sizzle is beginning to fade," Barron's Tiernan Ray wrote.
It is believed that the shift in Netflix's business model, with its international expansion, comes with a price as creating and acquiring original content has hurt the company's profitability. It was noted that, in the last five quarters, the streaming service has been unable to add to its cash flow position.
CBS noted that Netflix and Comcast have announced a new partnership. Customers of the cable giant will soon be able to enjoy their favorite Netflix shows through Comcast's X1 set-top boxes.