Netflix Stock Falls on Negative Analyst Report

DOWN: Reed Hastings

Less than a year ago, the Netflix chief's stock was at $285 a share. On July 30, it closed at just $57.75 thanks to slowing domestic growth and the high cost of expanding overseas.

The streaming-media company also says it will use social media for some public disclosures.

Shares of Netflix fell 2 percent Wednesday after Evercore Partners initiated coverage of the new-media firm with an “underweight” recommendation.

Also on Wednesday, Netflix said in a regulatory filing that it intends on using blogs, Facebook and Twitter for public disclosures. Chief executive Reed Hastings had done so in the past and regulators were investigating the matter, but Netflix said Wednesday that regulators had dropped the investigation.

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“On April 2, 2013, the SEC issued a Report of Investigation in which it announced that the Commission has determined not to pursue an enforcement action,” Netflix said in a filing Wednesday.

“In light of the SEC’s guidance, we encourage investors, the media, and others interested in our company to review the information we post on the U.S. social media channels listed below,” the company said. Its list included: The Netflix company blog and its tech blog, the Netflix Facebook Page and Twitter feed, as well as Hastings’ public Facebook page.

As for Evercore, analysts Alan Gould and Tracy Zhang wrote that competitive pressure could eventually hurt Netflix’s business.

“There will be more than one Internet TV competitor, leading to higher programming prices and preventing Netflix from raising consumer prices too aggressively,” they wrote. “Due to competition, we have pricing growing 4 percent annually to less than $10 monthly over five years.”

The analysts initiated coverage with a $115 price target. Netflix shares closed down $3.29 to $166.07 on Wednesday, indicating that the Evercore analysts think it likely that the stock will sink 31 percent in the next year.

“Internet TV is growing rapidly and Netflix is the clear leader in the market; however, we are highly skeptical of Netflix reaching even the low end of the 60-90 million subscribers that management has projected,” the analysts wrote.