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Netflix's stock has dropped due to concerns about subscriber growth
Netflix (NFLX), the world's most popular streaming video service, is facing mounting fears on Wall Street that it may fail its fourth-quarter membership growth forecasts.
On Nov. 17, Netflix stock reached a new high of 700.99 before falling. Since Nov. 30, it has been trading below its 50-day moving average line. Ahead of Netflix's fourth-quarter results announcement, two Wall Street analysts lowered their price predictions on the stock. Netflix, situated in Los Gatos, California, expects to release its December quarter results in January 20.
Analyst Doug Anmuth of JPMorgan cut his price target on Netflix shares from 750 to 725, but maintained his overweight rating. Analyst Scott Devitt of Stifel Nicolaus cut his price target from 690 to 630, but held his buy recommendation. He followed with a lower forecast for new customers in the fourth quarter from 8.8 million to 6.25 million. During that time, Netflix expects to add 8.5 million new customers. Anmuth also lowered his forecast for new customers in the first quarter to 5.5 million from 5.5 million previously. He had projected 6.5 million people.
Stifel's Devitt expressed concern about "the potential of slower subscriber growth" and "less lucrative expansion in overseas markets," noting a recent price cut in India as an example. In the fourth quarter, Devitt anticipates Netflix to gain 8.6 million new members, which is in line with analyst expectations. He had originally set a goal of 10.1 million net additions. Both analysts highlighted Apptopia data, which showed lower-than-expected fourth-quarter user engagement. Netflix is the best-performing stock in IBD's Leisure-Movies & Related industry category, which has 23 stocks. However, it gets a 74 out of 99 IBD Composite Rating.
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