Macquarie Research downgraded its rating of Netflix shares to neutral from outperform on Thursday.
"We think it will be hard for Netflix to grow much more in the US, and we suspect pricing power is limited," Macquarie says.
Netflix reported third-quarter earnings that handily beat Wall Street's expectations but delivered much lower U.S. subscriber growth than anticipated.Chesnot | Getty Imagesto neutral from outperform on Thursday, saying the streaming service's latest quarterly results were "comforting, but competition is coming."
"We think it will be hard for Netflix to grow much more in the US, and we suspect pricing power is limited. Content costs continue to rise and marketing demands will remain high, and the turn to positive [free cash flow] will take many years, while another debt raise is forthcoming," Macquarie analysts Tim Nollen and Jordan Boretz wrote in a note to investors.
"In some ways Netflix has defied the naysayers in Q3, coming close enough to guidance and delivering impressive revenue and earnings growth. We still think its opportunity is excellent, especially internationally where sub adds should continue to step up. But it's hard to deny the US is maturing," Macquarie said.
Netflix stock rose 8% in premarket trading from its previous close of $286.28 a share. Macquarie also lowered its price target on Netflix to $325 a share from $375 a share.
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