Despite some solid growth revealed during Netflix’s Q2 financials report yesterday, investors punished its stock, dropping its value by double digits over the last two days. Several analysts have expressed the concern that Netflix’s share price has reached its peak, at least for the near-term.
Wedbush Morgan analyst Michael Pachter is concerned about Netflix’s “staggering” drop in ARPU (average revenue per user) as more and more subscribers forgo the company’s more expensive plans and choose the $8.99 per month option. Said Pachter:
“We saw a greater than expected drop [in ARPU], which suggests that an incremental million subscribers shifted from higher priced plans,”
Pachter went on to echo Netflix CEO Reed Hastings by saying that the company would be “challenged” to keep up its rapid growth for much longer:
“We think investors will continue to focus on ARPU as a predictor of earnings growth . . . We expect its premium valuation to collapse,”
Merriman Curhan Ford analyst Eric Wold feels that despite Netflix’s “near monopolistic” grip on the by-mail movie rental business, there’s not much room for growth built into its stock price. Said Wold:
“We continue to believe any potential [earnings per share] upside in the next few years is priced into [Netflix] shares at current levels – and recommend investors wait for a better entry point to accumulate further positions,”
Over to you, Insiders. Where will Netflix’s shares go from here? Can the company beat analysts’ (and its own CEO’s) predictions and keep growing? Leave your opinion in the comments.
(via Home Media Magazine)