Bull vs Bear: Netflix downgraded to sell equivalent at Barclays, while Piper issues raise

Netflix (NASDAQ:NFLX) began this week with both an analyst downgrade and upgrade on Monday. The streaming giant was downgraded to Underweight from Equal Weight at Barclays, while Piper upgraded the stock to Overweight from Neutral.

The company’s valuation was at the center of both calls, with Barclays raising concerns that its valuation is “out of sync” with its probable growth path. Piper, meanwhile, said its prior stance was centered around valuation, but now it suggests “the company is expensive for a reason.”

In a note published on October 7, Barclays analysts said, “Netflix’s premium valuation is predicated on revenue growth being at least in the low double-digit range, which in their view, will get increasingly difficult and the growth algorithm will come with tradeoffs.”

“Even if Netflix (NFLX) gets to its revenue goal, [the] valuation implicitly prices in more than a doubling of [its subscriber base] from present level, which seems unrealistic.”

On the other hand, Piper said while there are still “levers to be pulled” in Netflix’s (NFLX) ads-free business, there are “multiple scenarios to positive estimate revisions.”

“In a potentially weaker macro, Netflix’s subscription-based model becomes even more attractive, particularly given the upcoming content slate.”

Seeking Alpha’s Quant system current rates the stock as a Hold.

Netflix (NFLX) shares were up around 2% in premarket hours on Monday.