Jon Hadad

About the Author Jon Hadad

Jon Hadad graduated from the University of Delaware with a degree in political science. Prior to joining the Smarter Analyst team, he was an industry analyst at a New York research firm.

Last Minute Thought: Buy or Sell Netflix (NFLX) Stock Before Q1’19 Earnings?


With the pressure mounting, today’s earnings announcement will be an important event for Netflix (NFLX) investors. 

The king of video-streaming is facing increased competition, including from Disney (Disney+) and Apple (Apple TV+), which both announced this month plans to launch their own streaming services. While Netflix is still the far-and-away leader in the space — with 139 million members as of January — growing alternatives at varying prices may eventually prove more threat than not for the pioneering company.

With the company preparing to release a detailed quarterly update in just a few minutes, Moonness’ top analyst Brian White keeps his Buy rating on NFLX stock, with a $440 price target, which implies nearly 22% upside from current levels. 

According to TipRanks, which measures analysts’ success rate based on how their calls perform, White has a yearly average return of 25% and a 75% success rate, and is ranked #16 out of 5,182 analysts. 

While believes Netflix will at least meet his 1Q:19 revenue estimate of $4.492 billion (up 21% YoY; Street at $4.501 billion) and his EPS projection of $0.57 (Street at $0.57). The analyst expects paid global streaming net additions — an important metric that investors are looking at — to hit “8.86 million QoQ to 148.1 million, up 25% YoY,” including 7.3 million coming from the international market.

On the competition front, White isn’t too nervous, as Netflix has had time to prepare. The analyst says, while “more competitors are entering the market….this has been anticipated for quite some time.” But while two of the world’s largest brands come into Netflix’s rear-view mirror, White says, “the quality and abundance of content available on Netflix for such a reasonable price will make it difficult for households to part with Netflix. Moreover, we believe consumers will ultimately subscribe to more than just one video subscription service.”

Looking ahead, the analyst is “projecting sales of $4.834 billion (up 24% YoY; Street at $4.947 billion) and EPS of $0.87 (Street at $0.99)” in the second quarter. As the company continues to ramp up with original content, the analyst reminds investors that “Netflix expects negative free cash flow in 2019 to be similar to 2018 (~$3 billion) with a 13% operating margin.”

All in all, even with increased competition, Netflix is still a Wall Street favorites. TipRanks analysis of analyst ratings shows more good is to come. Of 32 analyst ratings, 23 analysts recommend Buy, seven say Hold and two suggest Sell. The average price target among these analysts stand at $403.63, which represents about 12% upside. (See NFLX’s price targets and analyst ratings on TipRanks)

 

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