With the likes of Disney and Apple Inc. entering the video streaming business, there are apprehensions about whether Netflix, the pioneer in the video streaming industry, be able to weather and survive the soon-to-start streaming wars.
Despite the apprehensions, United States based banking and investment firm Goldman Sachs strongly believes that Netflix will be able to weather the storm because the company had fought off competition before. In a note to its clients, the company firm said that it is more likely than not that Netflix will come out the winner in the streaming wars.
However Goldman at the same time also cut down on the 12-month target price for Netflix’s stock price from $420 to $360 arguing that this was necessary because of the long-term pressures that the company will be facing with respect to growth in subscriber numbers and profit margins. The current price of the stock was at $280 a share.
Large, established and deep pocketed companies such as Disney, Apple and AT&T. among others, are slated to soon launch their own streaming services which is likely to increase competition for Netflix. However, analysts at Goldman said that such competitive pressures have been faced by Netflix earlier also – particularly from traditional media companies as well as larger tech companies. Such rival companies of Netflix included names such as HBO, Starz, Amazon, Google’s YouTube, Viacom and Comcast’s Sky.
According to analysts at Goldman, the subscriber numbers of Netflix have gone up even as competition had intensified showing the resilience of the company.
“Netflix’s incremental net subscriber additions have grown continuously despite significant competitive pressure,” Goldman Sachs analyst Heath Terry said in a note to clients. “We continue to believe that the relative value (price divided by content consumed) of Netflix far exceeds any of the current or planned competitive offerings, making it unlikely that any of them will replace Netflix as consumers’ primary streaming choice.”
It is likely that the fourth quarter results of Netflix is most likely to surpass the expectations of the market, said Goldman analysts in the note and added that the growth of the company would be driven by its strong content slate, as well a “more stable pricing environment” and strong and continued growth in its subscriber numbers.
However the share price of Netflix had taken a hit with the stiffening of streaming wars and in the past three months, the shares of the company were down by 26 per cent, Goldman also noted.
(Adapted from CNBC.com)