BARRON'S: Netflix could fall more than 50% by the end of the decade (NFLX)

pulse

August 14, 2017 4:26 PM

Netflix is "chiefly a hit-renter, not a hit-owner," Barron's said.

Barron's magazine forecasts that Netflix stock could fall by more than 50% by the end of 2020.

Sure, Netflix is one of the so-called FAANG stocks that are growing quickly and driving much of the stock market's gains. Its stock has multiplied 69 times on a split-adjusted basis over the past decade. And its monthly streaming service is popular and growing faster than expected.

But content-wise, Netflix is "chiefly a hit-renter, not a hit-owner," Jack Hough wrote in the August 12 Barron's cover article. And that, Hough argues, is its biggest weakness.

Here are some of Hough’s key arguments:

cash burn
Disney's
exclude its new content from Netflix

Netflix shares fell 5% last week after the Disney announcement and news that Facebook was launching its own slate of original video content.

But Barron's covers are jokingly called a contrarian indicator in some financial circles, and for good reason. Just look at the magazine's September 2015 forecast that Alibaba would fall 50% — the stock has surged 135% since that cover.

The Barron's cover was released just before news of a major coup by Netflix. The company poached Shonda Rhimes from ABC Studios after a 15-year relationship that yielded shows including "Scandal" and "Grey's Anatomy."

pulse