Netflix: Caris Cuts To Average; Less ‘Surety’

Shares of Netflix (NFLX) are down $6.99, or 4%, at $162.26 after Caris & Co.’s David Miller cut his rating on the stock to “Average” from “Above Average” following the company’s cut in its subscriber outlook yesterday.

Miller also cut his price target way, way down, to $185 from a prior $322.

“While we can argue all day long about the importance of meeting or exceeding financial targets regardless of subscriber targets, NFLX�s current multiple reflects a unit growth story, not a margin enhancement or FCF story,” writes Miller.

But miller also cut his year-end subscriber number, to 29 million from 29.7 million, arguing that management sounds as if they have less visibility overall.

And that means investors will pay a lower multiple of earnings for the stock because of less “surety,” as he writes.

“The fact that NFLX did not reiterate loosely-issued top line guidance of $1.0B in revenues for FQ4 is troubling to us, and calls into question management�s confidence in prognosticating the growth curve,” he writes.

“The reality is that NFLX clearly mis-diagnosed the demand curve for domestic subs in the quarter, clearly calling into question NFLX�s ability to prognosticate the overall health of the business.”