Axiom Capital’s Victor Anthony believes that a growing competition from Amazon and Google’s YouTube is “real” threat to Netflix, Inc. (NASDAQ:NFLX). The analyst initiated coverage on the U.S. streaming giant with a sell rating on Monday.
Anthony appeared on CNBC and discussed why he’s bearish on Netflix with the “Halftime Report” experts and “Mad Money” host Jim Cramer.
Shares of the video streaming company are down nearly 17% for the year as the company’s domestic subscriber growth has stalled. Anthony expects that the stock will further decline in the next 12 months.
The analyst believes that three factors – rising competition, diminishing pricing power, and increasing content costs – will be hurting the company’s future by putting “pressure on Netflix’s ability to meet consensus longer-term subscriber growth and profit estimates.”
He believes the intensifying competition is becoming a big threat to the company. This is “impacting subscriber growth, it’s putting upward pressure on content cost for Netflix, and you’re starting to see that in the results,” Anthony said.
Netflix shares surged 125% last year. But the stock is down 16.63% year-to-date. Anthony isn’t optimistic about the stock and believes that shares will drop 18% over the next 12 months.
RBC Capital Bullish on Netflix
Analysts at RBC Capital Markets are bullish on the streaming company, and they believe that the company will perform well in the coming months. Netflix is our #1 buy, according RBC.
Financial Post reported that the firm conducted three surveys in the U.S., U.K., and Brazil to learn about how the company is performing.
“These results showed rising usage, an improving competitive position, and potentially ameliorating impact from the 2016 price increases – clear positives, in our view,” the firm’s team, led by Mark Mahaney, said in a note.
“All in, we continue to believe that Netflix can grow its subscriber base while increasing price by continuing to improve its content offerings and proving out its value proposition to users – all this while increasing its profitability.”
Talking about the company’s international expansion, Anthony said that the streaming will have to burn some money on local content as many foreign countries, including France, require the streaming to host content from the home region. He believes that this could add “upward pressure for Netflix to license local content.”