Needham analyst Laura Martin downgraded Netflix (NFLX) to Underperform from Hold without a price target. The streaming has consistently stated it will not have advertising, which will result in U.S. subscriber losses, Martin tells investors in a research note.
She projects Netflix will lose 4M U.S. subs in 2020 at its premium-priced tier of $9-$16 per month. The company must add a second, lower-priced service to compete with Disney+ (DIS), Apple+ (AAPL), Hulu, CBS All Access (VIAC) and NBC's Peacock (CMCSA), each of which have $5-$7 per month choices, contends Martin.
The analyst, who believes Netflix's balance sheet "cannot withstand lower revenue," recommends a six-to-minute per hour ad load to supplement a $5-$7 monthly consumer fee.
She does not think the company's international subscriber growth can support its valuation and would find the stock more attractive around $260.
Netflix closed Monday down $4.85 to $302.50.
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