Netflix could spend additional $1.5 billion on content this year: Ken Sena

An analyst anticipated that Netflix, headed by CEO Reed Hastings, will have to spend an additional $1.5 billion on content this year in order to compete with its rivals. According to Evercore ISI analyst Ken Sena, competition could create problems for the company to 'sell' from 'hold'. Snapchat's new Discover platform, Apple's teaming with HBO Now and ABC's streaming of 'The Oscars Backstage' on Facebook could all hinder the company's development.

According to Sena, the extra expenditure on content will cut Netflix's free cash flow for 2015, to a negative $677 million, compared to an estimation of negative $97 million by Street.

New Netflix target of $380 per share given by Sena marks a downgrade by 16% off his earlier target. The stock dropped by 3.8%, and closed at $422 per share, i. e. 14% less than its all-time high of $489.29 on September 9.

The analysts said that his sum-of-the-parts valuation showed 'a premium valuation even still', regardless of the unexpected downgrade.

A value of $240 per share for Netflix's domestic streaming business and $120 for its fast-growing international operations are included in those parts. Sena also talked about an additional $20 for the company's legacy DVD-rental business.

The analyst also added that he appreciates Netflix's focus on original content, such as 'Orange Is the New Black' and 'House of Cards'. He also said that it is accountable for 'necessitating increased investment with uncertain return'.

Netflix Inc. provides on-demand Internet streaming media, which is available to viewers in all of North America, South America and parts of Europe. It has over 44 million members in more than 40 countries. On January 20, Netflix last posted its quarterly earnings data.