Netflix Price Target Slashed at Pivotal Research

NFLX is heading toward its worst quarter in seven years

by Karee Venema

Published on Sep 24, 2019 at 10:20 AM
Updated on Sep 24, 2019 at 10:20 AM

Pivotal Research slashed its Netflix Inc (NASDAQ:NFLX) price target to $350 from $515, saying the company will likely have to boost market content spending as competition in the streaming space accelerates. The brokerage firm also pointed to expectations for weak third-quarter subscriber growth -- echoing concerns expressed last week by Evercore ISI.

However, Pivotal Research said "sentiment in NFLX is awful" following the stock's recent pullback, which sets the stock up to "potentially climb a wall of worry around the launch of Disney+," which is Walt Disney's (DIS) streaming service. As such, the firm maintained its "buy" rating -- echoing the majority of analysts currently covering the FAANG stock.

Options traders, meanwhile, have been ramping up their bearish exposure in recent sessions. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Netflix stock's 10-day put/call volume ratio of 0.83 registers in the 76th annual percentile. So while calls have outpaced puts on an absolute basis, the rate of put buying relative to call buying has been quicker than usual.

Drilling down, the October 285 put has seen a notable increase in open interest over the past two weeks, with almost 10,500 contracts added. Data from the major options exchanges confirms buy-to-open activity here, meaning put buyers are betting on a sharp slide below $285 by the close on Friday, Oct. 18 -- a time frame that includes Netflix earnings, due the evening of Wednesday, Oct. 16.

At last check, NFLX stock is down 2.1% at $260.38, heading toward its fifth straight loss and lowest close since Dec. 28. Since topping out near $385 in mid-July, Netflix shares have surrendered 32.3%, and are off 29.4% so far this quarter, on track for its worst quarter in seven years.

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