Netflix may be showing too much 'hubris' ahead of ad-supported option launch
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A recent rally in Netflix's (NASDAQ:NFLX) stock price may be on the brink of petering out as the streaming TV giant prepares to roll out a subscription option that is supported by advertisements.
And according to an assessment by Benchmark Capital analyst Matthew Harrigan, Netflix (NFLX) might also be exhibiting a little too much hubris with regards to its advertising plans and what it is likely to charge companies to advertise on the Netflix (NFLX) platform.
"Early indications are Netflix is unrealistically aggressive on pricing," said Harrigan, who cited what he called "vanilla ad feature capabilities" and inadequate advertising performance measurement as issues that the company needs to address for its advertising option to succeed.
Harrigan said that Netflix (NFLX) may find the going rough as it is reportedly charging advertisers as much as three times the ad rates of Hulu (DIS) and Amazon Prime (AMZN). According to Harrigan, Netflix (NFLX) is "demanding" a $65 CPM rate from advertisers--CPM standing for cost per thousand, or what an advertiser pays for 1,000 views or impressions of an ad--while Hulu (DIS) and Amazon (AMZN) reportedly charge a $20 to $30 CPM rate.
Harrigan has a sell rating and $157-a-share price target on Netflix's (NFLX) stock.
Netflix (NFLX) is reportedly going to launch its ad-supported subscription option in November. Since the company reported second-quarter results in July, Netflix (NFLX) shares had climbed more than 17% before Tuesday's huge marketwide selloff that was spurred on by the latest inflation data.