Analysts Debate: Is Netflix, Inc. (NFLX) a Top Stock Once Again?

What we haven’t seen, yet, is a content owner creating an independent distribution system by pricing its content for direct sale to consumers, but I think that’s the wave of the future. Take Disney, for example. If Netflix doesn’t offer enough revenue for their rights, they can go on their own. Even if Netflix can gain control of a plethora of content, the cost will continue to eat into margins, creating a spiral that requires user growth to continue or, worse yet, price increases. We know consumers don’t have the appetite for that — at least not yet.

At the current price, I’m perfectly comfortable with an underperform call. I just don’t see how Netflix can make a sustainable profit long-term, and eventually that will come back to bite investors.

Final call
Don’t fall over, but that’s two consecutive weeks that we’ve come to a unanimous decision — no easy feat given our history of disagreements. After carefully examining Netflix, we’ve decided to make a CAPScall of underperform on the company. What’s most interesting is our unanimous call was made from three different angles yet still came to the same conclusion, by focusing on Netflix’s valuation, its rising costs, and it’s lack of competitive differentiation.

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The article Analysts Debate: Is Netflix a Top Stock Once Again? originally appeared on Fool.com and is written by Sean Williams, Travis Hoium, and Alex Planes.

Fool contributor Travis Hoium is short shares of Amazon.com. Fool contributors Sean Williams and Alex Planes hold no financial position in any company mentioned here. You can follow Sean at @TMFUltraLong, Alex on Twitter at @TMFBiggles, and Travis at @FlushDrawFool.The Motley Fool owns shares of Netflix, Disney, and Amazon.com. Motley Fool newsletter services have recommended buying shares of Netflix, Disney, Amazon.com, and Coinstar.

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