Shares of Netflix were falling Monday, following a rating downgrade on the stock.
Wells Fargo Securities lowered its rating on the video streaming company's stock to under-perform. It also slashed its price target on the shares to $265 a share, from $308.
Wells Fargo analyst Steven Cahall suggested that Netflix could be incurring a steep cost in its fight for market share in the cut-throat video streaming industry. The company could be overpaying for subscribers, according to the analyst. Cahall indicated that Netflix may be able to meet the Street's expectations for subscriber growth, but the massive spending towards chasing the growth is likely to pressurize the company's cash flow. Netflix's cumulative free-cash flow might fall short of analyst expectations by as much as $18 billion between 2019 and 2025, according to Cahall . Netflix won't be able to generate positive earnings on a per subscriber basis until 2022, per Cahall's analysis.
Competition in the streaming business is getting only getting hotter. Walt Disney recently launched its own streaming service, Disney+. Apple is also making its presence felt in the market with its Apple TV+.