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Netflix investors accustomed to outsized gains have watched their stock sink 20 percent since the streamer disclosed on July 17 that it lost 130,000 U.S. subscribers in the second quarter and are wondering if more pain is ahead. On Thursday, analyst Todd Juenger of Bernstein said Netflix shares could fall another 20 percent amid looming competition from Apple and Disney.
But the analyst also said Netflix shares should rebound mightily, to the tune of a 50 percent gain from where they traded today — which was down 2 percent to $286.60 while Juenger has a $450 year-over-year target price.
The disconnect, says the analyst, is in the perception that Disney+, which is set to launch Nov. 12 at $7 a month, and Apple TV+, which is set to debut Nov. 1 at $5 monthly, will harm Netflix’s business. That analysis may be sound in the short term but, when push comes to shove, not too many of the consumers who sign up for those competing services will ditch Netflix when doing so.
Juenger also argued Thursday in a research note that losing popular shows like Friends in 2020 and The Office in 2021 won’t harm Netflix, just as losing Starz and most of Fox didn’t hurt the streamer very much in years past. Library content is easily replaceable and, in fact, Netflix has already done so by announcing all 180 episodes of the iconic Seinfeld will be on the platform globally beginning in 2021 in a deal valued north of $500 million.
Netflix saves a bundle by not renewing Friends, The Office or a bunch of Disney content that the latter will now save for Disney+, thus giving Netflix the funds it needed for Seinfeld and for more original content, argues Juenger.
“The belief that new services will take market share from Netflix rests on an assumption that the services will compete with each other for a fixed number of potential subscribers. We don’t believe that’s true,” says the analyst. “We do not believe the launch of additional SVOD services will cause existing Netflix subs to cancel, or future Netflix subs to not materialize.”
In fact, asserts Juenger, the upcoming streamers “will accelerate the consumer migration from linear TV to SVOD,” a position taken by other analysts, as well, many of whom predict far more pain is in store for traditional broadcast and cable TV channels than is ahead for Netflix.
Netflix bears worry about subscriber growth, a loss of content and pricing power, given that the streamer charges nearly twice what Disney+ will cost, but Juenger says the latter is the most persuasive case, and even there the bears have it wrong.
“Netflix has a more expensive list price than Disney+ or Apple (or Amazon). We think that makes sense, given the much greater amount of content (and) frequency of new content on Netflix,” the analyst writes.
So even as Juenger warns that Netflix could fall to $230 a share, he remains confident it will rise to $450 in the next 12 months, hence he reiterated his “outperform” rating on the stock.
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