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Can Netflix (NFLX) Stock Live Up to the Q1 Hype?

Earnings season is upon us and one of the most anticipated reports will be released on Tuesday. Streaming giant Netflix (NFLX) will drop its quarterly statement in the midst of a global pandemic, one which has inadvertently been a boon to viewing figures. Stay-at-home measures have made Netflix stock one of the year’s star performers; The share price notched an all time high and is up 35% year-to-date.

RBC’s Mark Mahaney believes there’s one key metric to look out for in the upcoming report: “We believe a key catalyst for the stock on this print will be whether NFLX’s H1 outlook implies an acceleration in Global Paid Sub Adds vs. H1:19, and we believe this is a reasonable likelihood, given the Streaming surge during this COVID Crisis.”

The 5-star analyst expects 8 million new paid global streaming subscriptions (compared to 9.6 million in 1Q19), which will bring overall subscribers to 175 million, indicating 18% year-over-year growth. Mahaney is now calling for $5.75 billion in revenue and $1.69 in GAAP EPS. Both are above current consensus and guidance.

Data from Similar Web and Apptopia have indicated a boost to viewing figures in March, with particularly strong numbers in countries impacted earlier from COVID-19, such as Italy, Japan, and South Korea. This bodes well for April figures, regarding countries sent into lockdown further down the line.

Another metric, which has been mostly viewed as a negative for the streaming king, is one that gets a positive spin from Mahaney. The reports of much higher than expected Q1 subs for Disney’s recently launched streaming service Disney+ have mostly been seen as a clear indication the entertainment giant is encroaching on Netflix’ turf, but Mahaney begs to differ.

“We view this as confirming evidence that in the wake of an almost global stay-at-home environment, Streaming Subs have experienced a surge in both new users and in usage by existing users. We would expect NFLX to fully participate,” the analyst said.

As a result, ahead of the print tomorrow, Mahaney reiterates an Outperform on Netflix shares. (To watch Mahaney’s track record, click here)

The majority of the Street concurs, as among the 36 analysts to have published a call on Netflix over the last 3 months, 25 say Buy, 7 recommend a Hold, while 4 suggest Sell. The Moderate Buy consensus rating, though, is accompanied with a $408.39 price target, suggesting downside of nearly 7%. Either the analysts have yet to update their models, or the majority believe the stock has flown high enough for now. (See Netflix stock analysis on TipRanks)

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