Publicly traded companies ordinarily rejoice when Wall Street analysts upgrade their stock ratings. But I doubt that Netflix execs will take a great deal of pleasure from this morning’s note by Janney Capital Markets’ Tony Wible raising the home video company to “neutral” from “sell.” Wible says that Netflix has become less risky now that its stock price has retreated from a surge early this year: It closed on Friday at $67.86, down 43.5% over the last three months, and -2% since the beginning of 2012. Expectations for the company “are fairly low after the massive drop in the stock from its recent highs and the Street commentary about a looming earnings miss,” Wible says. He adds that Netflix doesn’t have to worry about studios backing away from licensing deals because they’ve become addicted to its payments, despite some signs that the streamed videos are cannibalizing TV ratings and disc sales. Meanwhile, Netflix has benefited from the fact that its Internet competitors — including cable and satellite’s TV Everywhere programs — have “moved at an embarrassingly slow pace.” The analyst adds that he’s not worried just yet that Netflix’s streaming customers will flee as broadband providers ditch all-you-can-eat pricing in favor of plans that charge higher fees to heavy users. With new compression technologies, “a consumer could stream about 500 hours of content (assuming an equal mix of SD and HD) before hitting a 250 GB cap,” he says. Wible also notes that Netflix’s DVD customers, who “were shunned by last year’s price increase,” aren’t abandoning Netflix as quickly as he expected. “While we expect the subs to decline, we believe the decline will be more gradual than is modeled by the Street.” The stock market is down about 1% in trading after the opening bell; Netflix is up about 1.3%.
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