Netflix shares climbed about 8% during last year, but they declined roughly 0.81% in active trading yesterday. While the shares are nearing their all-time high, we believe the stock possesses limited upside going forward. This is consistent with Wall Street expectation which states that Netflix, Inc. (NASDAQ:NFLX) shares possess no near-term upside from here.
According to our research, analysts see downside risk in Netflix shares. They believe that the stock is poised for a significant pullback going forward. This is because the Street analysts think that the US market has become highly saturated with limited growth potential in the near-term.
Moreover, it is also likely that the company would be negatively impacted by rising competition. As more players emerge in the market, they strive to drive down costs and prices. Due to this, NFLX’s revenues may be adversely affected, resulting in negative share momentum in the future. The company currently has 429.15 million shares outstanding, with a one-year stock value of $79.95-$133.88 and daily stock value of $129.29-$132.22.
Furthermore, Barron’s article further cited Wedbush analyst Michael Porter who believes that the shares of the company are overvalued, and its content library fails to provide a proper justification for its rising cash burn. He believes that while Netflix’s current price implies limited competition from Amazon, the company needs to increase its spending to maintain its international subscriber growth amid rising competition. Therefore, the analyst maintained his Underperform rating for NFLX.
Wall Street’s consensus price target of $125.22 also shows its downside potential of approximately 3.6% over the last close. We advise investors to remain cautious as they continue to reside in bullish camps. Moreover, out of 42 analysts covering the stock, 21 rated it as Buy, three suggested Overweight, 12 recommended Hold, one advocated Underweight, whereas five analysts advised selling the stock.