Citigroup analyst Jason Bazinet has downgraded Netflix from “buy” to “neutral,” predicting slowing revenue growth for the streaming giant, along with an increased content bill following the settlement of two major Hollywood guild strikes. 

Netflix shares had some early-morning turbulence on the Nasdaq, but have remained largely flat and stable Tuesday. 

Bazinet predicted Netflix’s content spending over the next two years, widely projected by analyst consensus to be around $18 billion, will be more in the neighborhood of $20.4 billion, with the streaming giant paying a premium following strike settlements with Hollywood writers and actors. 

Citigroup’s prediction seems in conflict with a report from earlier this week suggesting that Netflix is buying and producing fewer shows right now. 

As far as revenue growth, Netflix reported $32.743 billion, a 4.03% increase, in sales for the 12 months ending September 30. In 2022, Netflix reported revenue of $31.616 billion, a 6.46% increase from 2021.

Netflix is expected to report full earnings for fourth-quarter 2023 on January 23. 

“Netflix is a well-run company that has executed remarkably well in a highly competitive market,” Bazinet wrote. “But the equity market has responded to this with a material re-rating in Netflix’s stock over the past few years. And, the sell side expects a fairly robust set of financial results across many key financial metrics over the next two years. For our part, we see a handful of small risks — lower revenues, higher content costs, and potential M&A — that, to us, suggest the risk-reward is now more balanced. As such, we are moving to the sidelines.”

Citi equity analyst Jason Bazinet said that password sharing costs U.S. streaming companies $25 billion annually in lost revenue, and Netflix owns about 25% of that loss. 

“As streaming services move to center stage, thwarting this theft will be of growing importance for shareholders,” Bazinet wrote in a note to investors Monday morning. 

The Citi analyst’s estimate comes 10 days after Bank of America published a note suggesting a “substantial percentage” of streaming subscribers are sharing their authentication credentials with friends, family and hangers-on outside their homes. 

And research firm Magid said that about a third of all SVOD customers share their password with at least one other person.

For its part, Netflix began earlier this month testing a new crackdown, in which it is forcing users of its service outside the account holders IP address to use third-party authentication. 

Netflix is also testing a 30-day free trial of its service. 

Dish Network shares were up more than 4% in early trading Wednesday after Citigroup media analyst Jason Bazinet raised his rating on the stock to “buy,” adding the satellite TV service provider could be purchased for as much as $95 per share.

Bazinet did not say that a deal was imminent, only that he believed the ultimate end game for Dish was a sale. And at that price, Dish, which has struggled with subscriber losses at its legacy satellite TV business over the years, would be valued at more than double its current price range of about $43 per share. Most of that value comes from Dish’s wireless spectrum holdings, which Bazinet put at about $1.50 per point-of-presence (POP). That is more than double the price other analysts have placed on the spectrum.

Dish shares rose as high as 4.6% ($1.99 each) to $45.31 per share in early trading Feb. 7. The stock finished the day at $45.10 per share, up $1.78 each or 4.1%.

The gains were likely welcomed by Dish investors, who have seen the stock drop more than 50% since June, when it closed at $66.04 per share.  

Dish has long been rumored to be a target of several different companies over the years, most recently Verizon, which has struggled with its own over-the-top video strategy. While Verizon has about 5 million subscribers to its landline Fios TV product, it is expected to launch an over-the-top video product in the spring after some delays. Buying Dish, the parent of OTT pioneer Sling TV, with about 1.5 million customers, could jumpstart that strategy.

Verizon has repeatedly said it is not considering a transformational purchase – in the telco's Q4 earnings conference call in January, chair and CEO Lowell McAdam said “there is nothing going on right now,” concerning a big media play for the company.

Dish’s spectrum holdings have been a big part of its valuation for years, and the company is beginning to get closer to a federal deadline where it must at least show some progress in building out a wireless network. In the past Dish has said it would only do so with a partner, but that stance has softened as no partner has surfaced. Still, the company’s wireless network must reach at least 70% of the country by March 2020, a deadline that becomes increasingly harder to make the longer a build out is delayed.

Pivotal Research Group CEO and senior media & communications analyst Jeff Wlodarczak said he believes that a Dish sale in the medium- to long-term is inevitable, adding that while Verizon is the most logical buyer, other suitors could step up to the plate.

Wlodarczak pointed to T-Mobile, the third largest wireless carrier in the country, which could probably put the Dish spectrum to better use.

“Verizon claims to have to the best wireless network which allows them to maintain premium pricing,” Wlodarczak said.  “If T-Mobile is able to get Dish spectrum it would put them in a far better position spectrum-wise than Verizon, which would allow them to accelerate the market share gains they are already making.  In addition, the size of Dish’s video base would give T-Mobile leverage to start their own DirecTV-Now like service (recall they just bought a small player in the area).  I believe if T-Mobile goes for Dish it could put pressure on Verizon to come over the top with a more aggressive bid.”