Goldman Sachs Downgrades Netflix Inc.(NFLX:NSD) to a Sell rating

STA Research
by: STA Research

Goldman Sachs Downgrades Netflix Inc. to a Sell rating and lowers the target price to $186 from $265 on the company’s stock.  Goldman Sachs analyst Eric Sheridan  believes the stock is still excessively costly, despite the fact that it has lost two-thirds of its value. What makes him so concerned? “We are concerned about the impact of a consumer recession, as well as increased levels of competition, on demand trends (both in terms of gross adds and churn), margin expansion, and levels of content spend,” he writes. “We view NFLX as a show-me story with a light catalyst path in the next 6-12 months.”

Based on the Netflix Inc stock forecasts from 37 analysts, the average analyst target price for Netflix Inc is USD 410.61 over the next 12 months. Netflix Inc’s average analyst rating is Buy . Stock Target Advisor’s own stock analysis of Netflix Inc is Slightly Bullish , which is based on 9 positive signals and 5 negative signals. At the last closing, Netflix Inc’s stock price was USD 192.77Netflix Inc’s stock price has changed by -6.01% over the past week, +11.36% over the past month and -60.32% over the last year.

Netflix, Inc. provides entertainment services. It offers TV series, documentaries, feature films, and mobile games across various genres and languages. The company provides members the ability to receive streaming content through a host of internet-connected devices, including TVs, digital video players, television set-top boxes, and mobile devices. It also provides DVDs-by-mail membership services in the United States. The company has approximately 222 million paid members in 190 countries. Netflix, Inc. was incorporated in 1997 and is headquartered in Los Gatos, California.

What we like:

High market capitalization

This is one of the largest entities in its sector and is among the top quartile. Such companies tend to be more stable.

Superior risk adjusted returns

This stock has performed well, on a risk adjusted basis, compared to its sector peers(for a hold period of at least 12 months) and is in the top quartile.

Superior return on equity

The company management has delivered better return on equity in the most recent 4 quarters than its peers, placing it in the top quartile.

Superior capital utilization

The company management has delivered better return on invested capital in the most recent 4 quarters than its peers, placing it in the top quartile.

Superior return on assets

The company management has delivered better return on assets in the most recent 4 quarters than its peers, placing it in the top quartile.

Positive cash flow

The company had positive total cash flow in the most recent four quarters.

Positive free cash flow

The company had positive total free cash flow in the most recent four quarters.

Underpriced on free cash flow basis

The stock is trading low compared to its peers on a price to free cash flow basis and is in the top quartile. It may be underpriced but do check its financial performance to make sure there is no specific reason.

Superior Earnings Growth

This stock has shown top quartile earnings growth in the previous 5 years compared to its sector.

What we don’t like:

High volatility

The total returns for this company are volatile and above median for its sector over the past 5 years. Make sure you have the risk tolerance for investing in such stock.

Overpriced compared to earnings

The stock is trading high compared to its peers on a price to earning basis and is above the sector median.

Overpriced compared to book value

The stock is trading high compared to its peers median on a price to book value basis.

Overpriced on cashflow basis

The stock is trading high compared to its peers on a price to cash flow basis. It is priced above the median for its sectors. Proceed with caution if you are considering to buy.

Highly leveraged

The company is in the bottom half compared to its sector peers on debt to equity and is highly leveraged. However, do check the news and look at its sector and management statements. Sometimes this is high because the company is trying to grow aggressively.

 

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