It's not just the addition of a PS3 option for Amazon's (Nasdaq: AMZN) Prime Instant Video that has analysts worried about Netflix (Nasdaq: NFLX), it's the increasing weight of the competition that has them concerned.
Barclays this week lowered its rating on the company's shares from "overweight" to "equalweight," saying Netflix is facing more competition to attract subscribers in the U.S. market, adding the effort may be difficult to pull off because content prices are continuing to soar.
"We believe Netflix will now have more difficulty in acquiring new streaming subscribers on the domestic front, an effort that we believe can only be accomplished through continued investment in digital content," Barclays said. "However, we believe the old virtuous cycle of increasing subscriber growth, higher free cash flow and subsequent investment in new digital content will be more difficult to replicate in today's more competitive environment."
Amazon is, however, a prime culprit in the latest downgrade, as Barclays sees its content acquisition strategy accelerating and closing on Netflix. It estimates Amazon could have 75 percent as many titles as Netflix by year's end.
Netflix, which traded as high as $300 last July, and as low as $62.37 in November, was trading near $111 today in the late morning, down about 1.75 percent. Amazon, with a 52-week range of $166.77 to $246.71, was at $193.66, down 2.98 percent. Both stocks appears to be part of a general market sell off.
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