The fundamental and technical reasons why Netflix could plunge another 42%

The plunge may not be over for Netflix, which fell more than 13 percent on Tuesday.

Michael Pachter, an analyst at Wedbush Securities, certainly believes so as he pegs $50 as Netflix's 12-month target. While that actually represents a $5 increase from Pachter's prior price target, it implies a drop of about 42 percent from Tuesday's closing price of $85.84.

That drop, says Pachter, will come from a mix of rising prices and increasing competition.

"Netflix made the decision a quarter ago to delay the price increase that was originally scheduled for May 9 and phase it in over six months," he said Tuesday on CNBC's "Power Lunch." "[But] before prices started going up, which was really June and July, people quit."

"The fact is that long-time members are running out of stuff to watch," Pachter said. "We've seen everything, and now that 'House of Cards' and 'Orange is the New Black' are over for the year, maybe we'll go try something else."

The video streaming giant's subscriber numbers certainly reflect slowing growth. Netflix said Monday that while it had forecast adding 2.5 million new subscribers globally during the second quarter, the company actually came up short at 1.7 million.

"[Netflix is] investing so many billions of dollars, literally $7 billion, in original content and in buying rights that they're having to trim what they consider to be the fluff," said Pachter. "I think that means that they're not satisfying everybody, people are looking elsewhere. You have Hulu, you have Amazon, and I think that competition's starting to hit."

From a technical perspective, Rich Ross at Evercore ISI agrees that $50 is the magic number. That's based on his analysis of a short-term chart showing that Netflix's stock had already been in a downtrend.


"Truth is, this stock wasn't even doing well before today's 13 percent decline," he said Tuesday. "You were down 12 percent already year to date, trailing the S&P's plus 5 percent."

"I can see the stock testing $70 and making its way down to $50 in sort of a worst case scenario," he said.

However, BTIG's Rich Greenfield maintains a buy rating with a price target of $130 a share.

Disclosure: Comcast, which owns CNBC parent NBCUniversal, is a co-owner of Hulu.

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Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

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