Netflix’s annual shareholders meeting is June 9. Netflix shareholders certainly do not have anything to complain about. Just five years ago, the stock had taken a hit and was selling for $53.30 per share. Now, it is selling for around $627 per share. It is up 85 percent this year. However, the financials have some analysts worried, and recent format changes as well as acquisitions could prove costly for shareholders.
Michael Pachter, analyst for Webush Securities, doesn’t buy into the recent increases being good for those who are looking to buy shares in the streaming giant. According to a report from CNA Finance, Pachter is more than bearish on the stock. He puts a fair market value at $245 per share for Netflix shareholders.
Pachter feels the company needs to do a better job raising operating cash flow, and he thinks they may have over extended themselves creating debt by issuing $1.5 billion in bonds. This is $500 million more in bonds than they had originally planned to issue. The S&P 500 agreed with Pachter. They lowered the Netflix’s credit rating.
Netflix shareholders know what it is like to ride the wave of uncertainty. When the company decided to split off the streaming service from the home DVD delivery service in 2010, shares fell 75 percent. They weathered this storm, but other changes in the way they bring content to the consumer could prove costly for shareholders in the future.
On Monday, Netflix acquired the rights to distribute Brad Pitt’s satirical comedy War Machine. According to Deadline, Netflix paid $30 million. While Netflix has stated that a theatrical release is eminent for War Machine, it is not known whether it will simultaneously be released on its streaming service. Theatrical release is not guaranteed. Netflix faced stiff opposition from theater chains after purchasing the rights to the sequel of Crouching Tiger, Hidden Dragon in 2014.
Another subtle change that Netflix is trying out is in the streaming series category. Netflix recently released Between. In this series, a small town is plagued with a disease that kills all people over the age of 22. Instead of releasing the series all at once, Netflix has opted to release it a week at a time like the more traditional network television shows.
CinemaBlend reports the reason for the change is based on the fact that Between is airing on a traditional broadcasting network in Canada City. Netflix wanted the show pretty bad so they agreed to air it after it originally aired in Canada. It has not been received well. EW’s review summed up what most people think.
“Despite the intriguing premise, Between‘s writing winds up being as deadly as the show’s virus—except this sickness affects viewers of all ages.”
Do you think Netflix shareholders have a cause for worry? What do you think of the recent acquisitions? Fell free to let us know below.
[Photo by CNET]