After a couple of strong quarters, Netflix (NASDAQ:NFLX) delivered softer-than-expected total global streaming net additions in 2Q:18 of 5.15 million that missed the company’s guidance of 6.20 million. International net adds of 4.47 missed the company’s outlook of 5 million. Domestic net adds came in at 0.67 million in 2Q:18 and fell short of the company’s outlook of 1.20 million.
The earnings report released yesreday was, to sum it up in one word: disappointing.
In reaction, Monness’ top analyst Brian White lowered his price target on NFLX from $460 to $430, while reiterating a Buy rating on the stock. (To watch White’s track record, click here)
White wrote, “Given the 109% rally in the stock YTD and last night’s soft performance, the stock will finally get a correction during what has truly been an exceptional year. Given the meaningful upside over the past couple of quarters, Netflix may have gotten ahead of itself in terms of global streaming net addition expectations; however, we view this reset as healthy and not the end of this strong, global, secular growth story.”
“For 3Q:18, we are lowering our revenue estimate to $3.985 billion from $4.161 billion but raising our EPS projection to $0.66 from $0.62. For 2018, we are lowering our revenue estimate to $15.810 billion (Street is at $16.097 billion) from $16.240 billion and reducing our EPS estimate to $2.56 from $2.83 (Street is at $2.85). We are reducing our total streaming membership forecast at the end of 2018 to 142.3 million from 148.3 million. For 2019, we are lowering our revenue estimate to $19.100 billion from $20.539 billion (Street is at $20.128 billion) and lowering our EPS forecast to $4.14 from $4.40 (Street is at $4.64),” the analyst added.
Canaccord’s top analyst Michael Graham largely seems to echo White’s move, lowering the price target on NFLX from $500 to $450, while maintaining a Buy rating on the stock. (To watch Graham’s track record, click here)
Graham commented, “After four straight quarters of soundly beating subscriber guidance that resulted in the stock more than doubling, Netflix missed its subscriber guidance modestly in Q2. Management commented that churn was consistent but gross adds (while up y/y for paid subs) were below guidance both domestically and internationally. We suspect a variety of factors impacted Q2, including not having out-sized content hits as in recent quarters. We generally view the slight forecasting shortfall as a temporary issue, and note that: 1) the last two net add misses (Q2/16 and Q1/17) were one-quarter episodes; and 2) Q3 net add guidance seems to have been de-risked somewhat. This expensive stock may take some time to find bullish footing again, but we continue to believe in the long-term value proposition for consumers and investors.”
TipRanks suggests optimism with some caution baked into expectations when it comes to Wall Street’s majority perspective on the big NFLX machine. Out of 33 analysts polled in the last 3 months, 23 are bullish on Netflix stock, 9 are sidelined, while only 2 are bearish. However, the 12-month average price target stands at $396.73, marking a slight downside from where the stock is currently trading.
