Here’s what Wall Street is saying about Netflix’s surprise drop in subscriber additions

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Kate Mulgrew, left, and Selenis Leyva on Netflix original series “Orange Is the New Black.”
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JoJo Whilden/Netflix

Netflix’s stock is down 13% on Tuesday, after the streaming video service’s new subscriber additions came in way below expectations in the second quarter.

Netflix added 160,000 U.S. subscribers in the second quarter, compared to Wall Street’s forecast of 509,000, and its international growth also missed targets.

The company blamed the lack of subscriber growth on the media’s coverage of the ‘un-grandfathering’ of Netflix accounts” that resulted in price hikes for many subscribers.

Analysts cut their price targets for the stock, though many are still bullish.

Here are some of the key takeaways from analysts who cover the stock:


Macquarie: NEUTRAL

Rating: Neutral

Price Target: $85 (cut from $110)

Comment: “The irony is Netflix is beating EPS estimates due to its higher pricing. But higher pricing hurt sub levels in 2011 and subs are what matters for this stock.”


Nomura: BULLISH

Rating: Buy

Price Target: $110 (cut from $115)

Comment: “As we had warned on 6/20/16, Netflix’s international subscriber growth is beginning to slow as the company laps launch quarters for major markets. That being said, we believe the market underappreciates the revenue growth the company is showing from recent price increases. Moreover, Netflix reported contribution profit and operating income above expectations due to revenue growth exceeding expense growth.”


Bank of America Merrill Lynch: BULLISH

Rating: Buy

Price Target: $

Comment: “Expect a volatile 2H16 as Bears are emboldened on negative news and Bulls reevaluate long term sub targets. Reiterate Buy; Increased churn limited to FY16 and higher APRU should help fund future content spend.”


Credit Suisse: NEUTRAL

Rating: Neutral

Price Target: $122

Comment: “Citing un-grandfathering in the US, as well as larger International markets, and the upcoming Olympics, Netflix provided lower-than-expected sub growth guidance for Int’l for 3Q16 – but continues to see within-expectations gross adds, this suggests that demand for Netflix’s services remains robust and it should resume normalized net add growth.”


Piper Jaffray: BULLISH

Rating: Buy

Price Target: $122

Comment: “We believe concerns of domestic saturation, impact from ‘un-grandfathering’ of fees and Olympics, competition, and slower ramp of international subs, when coupled with the positives of long-term international growth potential, are reasonably reflected in our estimates and valuation methodology, which result in a NFLX price target of $122 (unchanged).”


Citi: NEUTRAL

Rating: Neutral

Price Target: $92 (cut from $106)

Comment: “Netflix reported 2Q16 results and provided guidance for 3Q16 that both were below expectations – even the most conservative forecasts we heard heading into the report…While we continue to have a favorable long-term view of Netflix and view the valuation as increasingly less stretched, we view the catalyst/setup factors this year as less favorable and CY17 forecasts as potentially still too high.”


Pacific Crest: BULLISH

Rating: Buy

Price Target: $125 (cut from $130)

Comment: “We continue to recommend owning NFLX. Despite soft Q2 results and Q3 guidance, we continue to believe Netflix’s core competitive advantages and long-term opportunity are intact, and that growth can reaccelerate following the negative impact of the price increase.”


J.P. Morgan: BULLISH

Rating: Buy

Price Target: $116

Comment: “We expect NFLX to work through its pricing changes in 2H16 and emerge as a larger, higher ASP (10-20% higher through 2016), and more profitable company into 2017.”


Goldman Sachs: BULLISH

Rating: Buy

Price Target: $

Comment: “With the highly anticipated risk of 3Q guidance behind us, we believe the related share price weakness is likely to be short-lived.”


Oppenheimer: BULLISH

Rating: Outperform

Price Target: $114 (cut from $123)

Comment: “We are lowering our price target to $114 from $123 as fears of increased churn were realized in 2Q, and will play out the rest of the year…Management reiterated that US contribution margin growth was on track. Int’l growth also remains slow, as localization efforts are taking time & money, with Turkey and Poland as next focus markets. While NFLX is best positioned to build global SVOD platform, 2016 will be a transitional year.”


KeyBanc Capital Markets: BULLISH

Rating: Buy

Price Target: $125 (cut from $130)

Comment: “We continue to recommend owning NFLX. Despite soft Q2 results and Q3 guidance, we continue to believe Netflix’s core competitive advantages and long-term opportunity are intact, and that growth can reaccelerate following the negative impact of the price increase.”


SunTrust Robinson Humphrey: NEUTRAL

Rating: Neutral

Price Target: $100 (cut from $110)

Comment: “We materially lower our sub adds forecast, though our revenue outlook is generally unchanged (higher ARPU per ungrandfathering) and we raise our below-consensus EPS forecast on lower tax rate.”


Stifel: BULLISH

Rating: Buy

Price Target: $120 (cut from $143)

Comment: “Despite these near-term headwinds to subscriber growth, we believe Netflix is positioning itself for long-term growth by expanding its already industry-leading slate of new original programming and broadening its local content offerings. Netflix shares may continue to experience volatility over the next few quarters but we believe the company remains the dominant global video platform and a valuable strategic asset.”


UBS: NEUTRAL

Rating: Neutral

Price Target: $92 (cut from $130)

Comment: “We believe Netflix’s core competencies in both content and technology will drive a virtuous circle of greater subs and increased viewing time, enabling higher ARPU which will fuel content spending and attract/retain more subs. At the same time, both the U.S. and core Int’l markets (launched pre-2015) are showing signs of maturity, the ramp in original content as the next driver of growth could take several quarters to prove out and NFLX’s valuation appropriately reflects our growth forecast.”