Netflix Analyst Eyes Complications Of A 'Hit-Driven Business'

Streaming video company Netflix Inc NFLX may have a headwind on its hands, as its slate of content isn't compelling enough to drive subscriber growth, Victor Anthony of Aegis Capital said Friday on CNBC "Worldwide Exchange."  

What Happened

One of the themes of Netflix's second-quarter earnings report and conference call was that the platform was negatively impacted by a lack of hit-driven content, Anthony said.

Since then, the Dave Chapelle comedy special has created a lot of excitement and resulted in an uptick in usage when it was released, he said.

Netflix is very much a "hit-driven business" despite the company's attempts to "condition investors" to think otherwise, Anthony said. 

One of the concerns associated with Netflix's hit-driven business model of releasing an entire season at once is that consumers can finish watching a series in days and cancel their membership — only to renew a few months down the line, the analyst said. 

Consumers have been canceling their memberships and rejoining since day one, but they represent a small subset of consumers and do not have a notable impact on subscriber metrics, he said. 

What does concern Anthony is the lack of pricing power as Netflix's competition continues to grow.

The stock is trading at an "intrinsically high valuation," he said. 

Why It's Important

Netflix's investment profile has multiple uncertainties, the analyst said. 

Under a best case scenario, they could prevent new investors from buying the stock, Anthony said.

Under a worst-case scenario, existing large investors might start to look at trimming or exiting their positions, he said. 

What's Next

Anthony said he will revisit his Hold rating and $310 price target on Netflix's stock.

Netflix shares were down 0.43% at $262.17 at the time of publication. 

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