Analysts are having some difficulty getting a clear picture of Netflix's streaming future -- and its stock is paying the price.
Shares in the Web video-rental service fell 8 percent to $67. 75 in morning trading after Merrill Lynch/BofA downgraded the stock. Yesterday, Netflix closed up 10 percent after Morgan Stanley analyst Scott Devitt raised his rating and boosted his price target to $85.
Last Wednesday, Mark Mahaney, a Citigroup analyst also helped send the stock price up when he called Netflix a "screaming buy." The upgrades were based in part on the belief that Amazon isn't as big a threat as some feared and that the Seattle-based retailer is unwilling to spend as much as Netflix to acquire movies and TV shows.
That's a theory that Netflix CEO Reed Hastings has helped to promote. He told The Wall Street Journal last month that Netflix's content budget is three-times higher than Amazon's. He also called Amazon's video service a "confusing mess."
Cue up the scary-sounding music: Reuters said today that it found information that indicates Amazon is ready to spend big sums on video. The Web retailer's deal with Epix, the pay-TV service that provides Amazon and Netflix with content, includes a pay-for-performance clause.
In addition to the fixed fee that Amazon pays Epix, the merchant also will pay an additional amount if the number of subscribers to Amazon's Prime Instant Video service rises above certain numbers, according to Reuters.
Netflix is due to report third-quarter earnings on October 23.