The stunning collapse in Netflix’s (NFLX) stock price comes as a surprise to many analysts, but a few of them did see it coming. Nobody expected Netflix to administer self-inflicted wounds through its bungling of subscription price increases and attempted splitting of its streaming and DVD lines. But there were signs of trouble brewing months ago.
We drew attention to the froth in April in Netflix Flying Close the Sun, noting that the company’s move into original content “along with increasing demands for higher payments from movie studios, could mean that ballooning content costs will drag the high-flying company back down to earth.”
Many analysts at that time were boosting their price targets to around $300, but some had targets that were close to today’s opening price of $78.63.
Long-time bear Michael Pachter of Wedbush Securities in April had a price target of $80 and had held an Underperform rating since Novermber 2009. But he got swept up in the bullish tide, later raising his recommendation to Outperform, which he cut back to Neutral earlier this month. He now has a target of $82.50.
Janney Capital’s Tony Wible cut the company to Sell in April, but still had a target of $160. He moved up to a Hold recommendation earlier this month while remaining cautious on Netflix’s prospects. He now has a target of just $51. And Needham’s Charlie Wolf in April cut the company to Underperform with no price target.
The median target of 14 analysts who have updated their targets since Netflix’s earnings announcement is $86.25. That’s down from $225 in March.
| Netflix 12-month Price Targets | |
| Barclays Capital | $125.00 |
| Hudson Square | $110.00 |
| Piper Jaffray | $100.00 |
| Credit Suisse | $100.00 |
| Jefferies & Co | $90.00 |
| Morgan Keegan | $90.00 |
| UBS | $90.00 |
| Wedbush | $82.50 |
| Goldman Sachs | $75.00 |
| JP Morgan | $67.00 |
| Atlantic Equities | $70.00 |
| Susquehanna | $60.00 |
| Standard & Poor’s | $55.00 |
| Janney Capital Markets | $51.00 |
| Median | $86.25 |
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Sources: Alacra Pulse, Barron’s TechTrader Daily, Forbes, LocalizedUSA, ProActive Investors, TheStreet.com, Reuters, StreetInsider.
