Netflix Is Slapped With A Downgrade

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Netflix has gotten too big for its britches says Nat Schindler at Bank Of America in a note this morning.After the ripping off a nice little run for the year, Schindler is downgrading the stock to underperform because he thinks the stock is due to crash once again.

His reasons:

We are downgrading Netflix to Underperform from Neutral after the stock’s 42% year-to-date increase, a move we consider unwarranted.

We see five main overhangs to the stock heading into 2012:

1) second wave of negative press leading into 2012,

2) customer loyalty dwindling,

3) international expansion could prove to be a drag on profitability post 2012,

4) rising content costs making it expensive to refresh streaming library, and

5) 35mn, up from 24mn at the end of 2012, domestic subscribers needed to reach our 2013 estimates.

Our $85 price objective (PO) is based on 27x our 2013 non-GAAP EPS estimate of $3.14.