The Ratings Game: Netflix is ‘easily the best streamer’ — but that doesn’t make it a great stock, says Bernstein

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Netflix Inc. has become the media equivalent of a utility, with “status as a long, durable service,” according to Bernstein analysts. But that doesn’t necessarily mean its stock is a winner.

Bernstein’s Laurent Yoon and Mark Shmulik began coverage of Netflix shares
NFLX,
+2.39%
with a market-perform rating late Thursday, likening the stock to “a good show,” but one that’s run on for many seasons to the point where they “can’t decide whether to keep watching or see what else is on.”

“The challenge of being labeled a utility, of course, is how a maturing company continues finding growth,” the analysts said. “We see plenty of opportunities, though conclude that expectations are likely ahead of the reality.”

While there’s been a lot of hype about Netflix’s ongoing crackdown on account sharing, Yoon and Shmulik don’t think the initiative will be enough to keep subscriber growth on track. “It’s likely we’ll be 2/3 of the way through capturing ~15M incremental paying subs by year-end,” they wrote.

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They also view the company’s international push as somewhat of a mixed bag, since subscriber growth “comes at a cost requiring continued investment in local (language) content to see sustained growth.” The Bernstein team sees “a ceiling tied to insufficient local content,” driving the analysts to a below-consensus view on subscriber expectations.

While Netflix is “easily the best streamer,” Bernstein is more upbeat about some more traditional media players, launching coverage of shares of Walt Disney Co.
DIS,
+2.64%
and Warner Bros Discovery Inc.
WBD,
+1.88%
with outperform ratings. Yoon also established an underperform stance on Paramount Global’s stock
PARA,
+1.29%
and set a market-perform rating on shares of Fox Corp.
FOXA,
+0.60%