NEW YORK - Citigroup analysts have adjusted their outlook on Netflix (NASDAQ:NFLX), moving the streaming giant's rating from "Buy" to "Hold" amid concerns about its future revenue growth and profit margins.
The decision, released today, is rooted in apprehensions regarding escalating content costs and the uncertainty surrounding the company's stock repurchase plans.
The analysts project that Netflix's spending on content will surge to approximately $20.4 billion by 2025, a substantial increase that could potentially strain the company's finances. This anticipated rise in expenses casts doubt on Netflix's ability to expand its earnings before interest and taxes (EBIT) margin over the next two years.
Despite the downgrade, it's notable that Netflix's stock has experienced considerable growth over the past year. The company's performance has been strong, but Citigroup's analysis suggests caution due to the financial challenges that lie ahead. The focus for investors and analysts alike will now be on how Netflix manages its content budget and whether it can maintain its growth trajectory amid these cost pressures.
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