Deutsche Bank AG initiated coverage on Netflix Inc. with a sell rating, citing that market’s expectations for the company are too high and the possibility of being an acquisition target is low.
Deutsche analyst Bryan Kraft also initiated its coverage of the stock with a 12-month price target of $90, about 15 percent below Netflix closed on Friday.
"We see the risk/reward on the stock as unattractive," analyst Bryan Kraft wrote in a note to clients Sunday. "This is a very long duration, high multiple investment with market expectations that appear too high through 2020, when most analysts seem to be looking for valuation support. We are skeptical that Netflix will be acquired."
The analyst said that the company is still a good business, it is winning the market share in streaming video at home and overseas, thanks to its original contents. But the analysts are cautious on the stock as the company’s cost is raising and the stock is going up too much.
The stock was up 134 percent in 2015, while is down 8.4 percent in 2016.
The bank also showed skepticism that Netflix will be acquired by Disney or Apple. They don’t see much potential for synergies by combining Netflix with those companies.
"Disney could be interested in Netflix because it sees an even bigger international opportunity than is priced into Netflix's shares today," they write. However, that alone is not enough for a deal. "All of that said, the strategic rationale for putting Disney and Netflix together is not all that compelling," they conclude.