Don't Buy Into Netflix Model: Analyst

Investors might want to avoid Netflix after the video company lowered its third-quarter forecast for U.S. subscribers, Janney Montgomery Scott analyst Tony Wible told CNBC Thursday.

"Netflix’s management is generally regarded as the smartest guys in the room, and the fact that they put out guidance and had to lower those expectations suggests they didn’t even fully have their arms around this," he said.

"I’d argue here that management is selling shares at an aggressive pace and the CEO doesn't even own shares directly," he said. "There’s a strong signal here that this is a model that people shouldn't be buying into."

Wible, who has a "sell" rating and a $170 price target on Netflix , said the company's attempt to get subscribers to switch from DVD rentals to streaming content, and pay more for it, has driven some subscribers away.

More recently, JPMorgan cut its price target on Netflix to $245 from $340.

"The Netflix story is one of momentum. They need more [subscribers] to find more content to ultimately get more subs," he said. "But now they are asking people to pay more and get less. I think that is breaking the momentum."

Earlier Thursday, Netflix lowered its third-quarter forecastto 2.2 million from 3 million subscribers who opt for DVD, but not streaming services. The company also cut its forecast for streaming-only subscribers.

ON THE OTHER HAND: Watch Jim Cramer's Optimistic View of Netflix, Following Its Recent Price Hike.

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Disclosures:

Neither Tony Wible or his company own shares, but Janney Montgomery Scott may seek compensation for investment banking services from Netflix.

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