Tech

Netflix raised several red flags in its earnings that mean it might be time to take profits: Analyst

Key Points
  • Netflix's quarterly earnings report raised "several red flags" that will likely keep the stock range-bound over the next few quarters, says Victor Anthony of Aegis Capital.
  • Among them, the loss of U.S. subscribers due in part to the streaming giant's "aggressive" regional price increases, he says.
Analysts debate whether investors should ditch Netflix
VIDEO4:3304:33
Analysts debate whether investors should ditch Netflix

Netflix's quarterly earnings report raised "several red flags" that will likely keep the stock range-bound over the next few quarters, a tech analyst told CNBC on Thursday.

Victor Anthony, managing director and internet analyst at Aegis Capital, said that the loss of paid domestic subscribers due in part to the streaming giant's "aggressive" regional price increases was a concern. Netflix's original content slate and looming competition from new streaming platforms could cause investors to pause, he said.

"What happens when competition does become a factor?" Anthony said in an interview with "Closing Bell." "That could be a meaningful challenge for Netflix and their ability to grow [subscribers.]"

Anthony said it might be time for investors to consider taking profits in Netflix.

Shares of Netflix closed down more than 10% on Thursday, a day after its second-quarter earnings report showed a loss in U.S. subscribers and a large miss on international adds. The company blamed price increases, a weak slate of original content and a "pull-forward effect" from a particularly strong first quarter.

It expects the third quarter will be strong as consumers rush to watch the third season of hit show "Stranger Things."

The report comes at an uncertain time for Netflix. It will lose two of it's most most-watched shows, "The Office" and "Friends." It also faces the threat of new streaming content from competitors such as Disney.

Anthont said it's possible these new platforms could be "complementary" to Netflix but it's still unknown.

"Can consumers pay for multiple different streaming options? ... we haven't really tested that in the market yet," he said.

Michael Graham, senior internet analyst at Canaccord Genuity, said he isn't as concerned about new competition, telling CNBC that Netflix could do very well "in that content battle."

"There's no single show on Netflix that accounts for 2 or 3% of its streaming hours, so it's hard for me to see a scenario where consumers are sort of anticipating the loss of 'Friends,'" he said in the same "Closing Bell" segment.

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