Netflix, Inc. (NFLX) Draws Out Its Biggest Bull Ahead of Q3 Print Tonight, Snap Inc (SNAP) Popularity Wins Over Millennials More Than Advertisers

Goldman Sachs: NFLX will outclass uplifted forecasts; Aegis: SNAP skirts downside risk in advertising growth.


Netflix Is Itching for a 3Q Earnings Beat

Netflix, Inc. (NASDAQ:NFLX) is readying to release third-quarter earnings after this evening’s bell and the Street’s eyes are waiting to see if the video streaming giant can keep up its momentum, with shares having just achieved their highest point yet, scaling past $200.

Goldman Sachs analyst Heath Terry is angling for a stellar quarterly print tonight, anticipating that Netflix is raring to bring a beat to the table to already lofty expectations. While Terry projects the giant will magnetize an extra 13.9 million subscribers to its base for the back half of 2017, more bullish than the Street’s 10.8 million, he even believes Netflix can trounce his forecast.

Ahead of the print, the analyst leaps to lead the pack of bulls on the Street, reiterating a Buy rating on NFLX while lifting the price target to $235, which represents a just under 17% increase from current levels. (To watch Terry’s track record, click here)

“We continue to believe that Netflix’s content spend is the most important driver of incremental subscriber growth” along with “engagement (and the pricing power that comes with it),” says Terry, who believes original content is going to be a real heavy-hitter champion for the giant between quarterly highlights like “Stranger Things,” “Outlander,” “Narcos,” and “Ozark.” For the back half of 2017, “from both a breadth and quality perspective, the company’s content slate is well-positioned to drive subscriber growth,” predicts the analyst, who likewise anticipates the more Netflix continues to invest in its original content for the year, the “further value” for the giant’s subs into 2018.

For 2018, the analyst calls for a rise from $14.75 billion in revenue up to $15.41 billion, and lifts his EPS expectations from $1.89 to $2.

Glancing ahead to not just tonight’s print, but also Netflix’s future trajectory, Terry could not be more bullish, asserting: “We believe consensus subscriber estimates for Netflix ahead of Monday’s earnings remain too low, particularly for the quarter, 4Q, and beyond,”

Ultimately, amid a “period of heavy content consumption,” if Netflix subscribers do not like more expensive plans, Terry believes rather than leaving the company’s streaming services, customers will simply backtrack to the cheapest of the plans: the basic $7.99 per month service. “While high expectations, particularly in light of the price increase, could lead to volatility post [earnings] results, we believe upward revisions to consensus estimates will ultimately drive further outperformance,” concludes Terry.

Wall Street likes this internet stock player for the most part, as TipRanks analytics showcase NFLX as a Buy. Based on 35 analysts polled by TipRanks in the last 3 months, 23 rate a Buy on Netflix stock, 11 maintain a Hold, while 1 issues a Sell on the stock. The 12-month average price target stands at $202.18.

Teens Are Mad About Snap, But What About Advertisers?

Top analyst Victor Anthony at Aegis is out with a cagey research report on Snap Inc (NYSE:SNAP) after spending time with teenagers throughout the week to have more insight into what social media platforms captivate the most teen engagement. Calling it “eye-opening” to see the popular Snapchat app parent company’s platform won the popularity contest by a mile, well past rivals Facebook-acquired Instagram and core Facebook, why is one of Wall Street’s best performing analysts hedging his bets on Snap?

True, these “hyper engaged” teens back an intent to keep using Snapchat well past college years, and this is a crucial “positive” for the company that could offset a long-term risk rivalry factor in terms of Instagram’s threat. However, though teens are Snapchat-obsessed, it seems the same story cannot be said for advertisers- and herein lies a considerable short-term concern that keeps Anthony sidelined on this favorite millennial king of the social media court. Teens just do not care about Snapchat ads and are not leaping to buy these products despite Snap’s initiative to upgrade its ad technology.

Overall, “[…] the fact that the teens take no action based on ads should be a troubling sign for advertisers. Maybe the demo may not be receptive to ads as we would like to think. And third, from the checks, it is clear that Snap has not reached a must-buy status like Facebook, Google, and YouTube. Until it does, they will continue to face immense competitive pressure for ads. We are encouraged by steps to increase credibility at the auction level, adding more advertisers, improving measurements and ROIs, and increasing pricing over-time. The Context Cards launched Wednesday should drive engagement. We model 181M DAUs (+8M) for 3Q17, but a regression of our tracking data points to DAUs closer to 185M (+12M). This is above consensus, but the shares, we believe, should trade on advertising growth, where we see more downside risks. Overall, we see near-term challenges for both significant usage outside of the key demo and in drawing advertisers to the platform,” Anthony surmises.

As such, the analyst reiterates a Hold rating on SNAP stock with a $15 price target, which implies a 9% downside from where the shares last closed.

Victor Anthony has a very good TipRanks score with a 67% success rate and a high ranking of #149 out of 4,697 analysts. Anthony realizes 14.8% in his annual returns. When recommending SNAP, Anthony earns 0.0% in average profits on the stock.

The word on the Street mirrors this top analyst’s cautious tone when it comes to the social media player, as TipRanks analytics exhibit SNAP as a Hold. Out of 27 analysts polled by TipRanks in the last 3 months, 8 are bullish on Snap stock, 14 remain sidelined, and 5 are bearish on the stock. With a loss potential of nearly 9%, the stock’s consensus target price stands at $15.07.

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