Netflix (NFLX) finished Wednesday's trading flat after a flood of news provided for a volatile day in which bears and bulls fought to a draw.
Shares of the Los Gatos, Calif.-based streaming stalwart topped off the day at $277.66 per share, the same as its close to 2018, and maintained its seesaw pattern after hours before beginning to turn negative more strongly about 30 minutes after close.
The pattern in the stock has remained hard to read as many analysts remain confident in the company's streaming supremacy, but temper targets on the potential for slowing subscriber growth.
"Maintain Buy, despite near-term subs adds tracking soft (we're watching for December data), with the content slate set to strengthen into mid-year including 'Stranger Things,'" SunTrust analyst Matthew Thornton wrote explaining his continued belief in the stock. "We believe the company still has optionality around pricing (lower and higher, depending on market), distribution and partnerships, box office, merchandising, product placement, and licensing out content."
Nonetheless, he joined the trend of target trimming, cutting his price target from $410 per share to just $355.
Debt is one of the lingering issues that is causing many analysts to rein in targets as well.
Amid the announcement of new chief financial officer on Wednesday, the company's reddening books are still drawing concern from market participants.
Total debt now stands at more than $10 billion for the BB-rated company, a level that has grown as Netflix has transition away from reliance on larger media entities for content. About $2 billion in high-yield debt was added to the debt pile in late October to further its transition efforts, adding to concern among analysts.
The debt should only stand to increase as the company is forced to increase its original content output to fend off a fiercer challenge from Disney (DIS) and others.
Given the increased competition and its impact on the necessary strategy for the company, Real Money contributor Stephen Guilfoyle noted the stock is one of his favorite short ideas as he suspects company's like Disney will begin to cannibalize the perceived king of content.
Despite the competition and debt problem, the company did have some good news to counter issues arising from Saudi Arabian litigation and CFO succession headlines.
Primarily, the company's effort to circumvent Apple's (AAPL) iTunes fees could represent a significant positive for margin squeeze mitigation.
As a result of the move Netflix will be able to keep all of the subscription revenue coming in and avoid the "Apple Tax" that would represent a 15% cut to users moving through the app store. At one point, the tax represented up to a 30% cut to Apple.
"This should not come as a surprise," Thornton wrote on Wednesday. "As mobile-first countries and households rise in the mix, commissions to the mobile app stores become a material headwind to margins."
Some $256 million was paid to Apple in 2018 for App Store hosting, according to Sensor Tower, a mobile app intelligence provider. The savings from avoiding those payments will add to revenue saved from the company's eschewing of Alphabet's (GOOGL) Google Play store and its fees in early 2018.
The move away from the larger companies charging exorbitant fees could represent even larger savings in the future as consumers move to mobile-first entertainment more rapidly.
According to Pew Research, mobile streaming consumption doubled from 2012 to 2015 and continues to accelerate. Netflix has been a major beneficiary of this trend in recent years, growing mobile revenue nearly 100% year over year in its fiscal third quarter.
With a go-it-alone method, it could reap all of the benefits of this secular trend rather than paying up to Apple.Still, given the volatility of the comparatively expensive stock, Real Money had other plays to consider for cord cutters.
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