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.

Stifel’s Top Analyst Bullish on Netflix (NFLX) Stock Ahead of 2Q:19 Earnings


It’s earnings time for Netflix (NFLX). 

The streaming giant is set to announce second-quarter results after the closing bell today, as Wall Street looks to see if the company can continue building on its success. As usual, investors will focus on paid subscriber growth and operating margin, which is closely tied to spending on content. In the first quarter, Netflix added 9.6 million new paying members, more than the 8.9 million Wall Street had expected. But operating margin fell from the same time last year, as spending continues to rise on new content. Ahead of earnings, investors are hoping Netflix can keep pace with its own guidance.

Stifel Analyst Scott Devitt is a bit more bullish than management on Netflix. The analyst forecasts 330K and 4.77M new subscribers for domestic and international, respectively, compared to guidance of 300K and 4.7M. The analyst is optimistic Netflix can beat its own expectations, after its Q1 report which showed solid gains versus its own estimates. On revenue, Devitt is expecting Netflix to see a 26% rise since this time last year, and estimates operating margins equal to that of Netflix guidance, at 12.5%. 

As a result, Devitt maintains a Buy rating on Netflix stock, with $425 price target on the stock, which implies nearly 17% upside from current levels. (To watch Devitt’s track record, click here)

As always, we like to give credit where credit is due. According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, Scott Devitt has a yearly average return of 23% and a 73% success rate. Devitt is ranked #33 out of 5,238 analysts.

A major component to Netflix is its original content. While the company began as a distributor of content, it has shifted its business to content creation. Netflix continues to spend billions of dollars on original content. In Q2, the company released a new season of Lucifer, Black Mirror as well as a new Adam Sander movie. Devitt says many of the new seasons and titles reached “over 1 million views on the Netflix YouTube page,” which the analyst views as “an indicator of highly engaging content.” As Netflix continues to battle against traditional production companies and new media, including Apple and Amazon, many point to its original content as an important factor. 

All in all, Netflix’s stock is always a big story come earnings. The company has a knack of outperforming Wall Street estimates, and its own. TipRanks analysis shows that Wall Street sees growth continuing. Of 29 analyst ratings, there is a Strong Buy consensus, with 23 analysts recommending Buy, five saying Hold and only one suggesting Sell. The average price target among these analysts stand at $419.35, which represents about 10% upside from where the stock is currently trading. (See NFLX’s price targets and analyst ratings on TipRanks)

 

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