Video streaming giant Netflix, Inc. (NASDAQ:NFLX) will report its Q3 results today after market close. Year-to-date, shares of the company have surged by over 130% from a low of $45.55 on January 12th. Analyst Robert Peck of SunTrust weighed in on the stock ahead of earnings.
Yesterday, Peck maintained his Neutral rating on the stock but increased his price target for to $110 from $95.
Netflix operates in three distinct segments: domestic streaming, international streaming, and domestic DVD. As per Peck, “While Netflix might miss the domestic subscriber guidance, the company saw significantly higher net additions in 3Q15 compared to prior Q3s.” Additionally, Peck said that his “proprietary analysis of the popularity of new content does not seem to justify the guidance.”
Peck also noted that trial memberships for the quarter were meaningfully lower than in prior Q3s. Referring to net international additions for 3Q15, Peck says “these were in-line with prior Q3s, while trial members were comparable to Q2.
Peck’s proprietary analysis also indicates “continued strength in Latin America, while Japan could be a wildcard.” In the most recent quarter, the company added Japan in line with its plans to expand in Asia.
Referring to price increases by Netflix (in 2014 and also one a few days ago, but this time only for new users), Peck said, “Grandfathered pricing from the 2Q14/4Q15 price increases will expire on 2Q16/4Q16 and could cause an uptick in churn.”
Peck has raised his 2015 and 2016 revenue and EBITDA estimates for the company to reflect “flow-through of price increases partly offset by lower domestic paid members.”
Robert Peck has only issued hold ratings on Netflix so he does not have a success rate or an average return on the stock. Overall, Peck has a 59% success rate recommending stocks with a +9.0% average return per rating when measured over a one-year horizon and no benchmark.
According to TipRanks, out of 30 analysts who have recently rated Netflix’s stock, 21 have rated it as a Buy, 7 have rated it as Hold, and 2 have rated it as Sell. The average 12-month price target for the stock is $124.44, an upside of 13.41% from current levels.