Netflix’s (NFLX) second quarter earnings will be important as the company looks to continue its strong growth with new competitors set to enter the streaming market in the fall. With a global platform spanning 190 countries and popular original content, Netflix shouldn’t have much to worry about. However, in the streaming industry, the second quarter is notoriously weak for paid streaming additions, so it will be fascinating to see if analysts are impressed with its Q2 results.
Monness analyst Brian White weighs in with a few metrics worth watching when the report goes live. Ahead of the print, the analyst reiterates a Buy rating on Netflix stock, with $420 price target, which implies nearly 10% upside from current levels.
It is only fair to give credit where it’s due, and Brian White deserves it. The analyst is ranked #11 out of 5,237 analysts rated by TipRanks, with a success rate of 76% on his calls and an average annual return of 26.7%.
White is forecasting 26% revenue growth and EPS of $0.55 for the second quarter. He also predicts a “9% [quarter-on-quarter] rise in sales… [which] reflects the positive impact of the new price hikes that were first announced in January.” In the four quarters, Netflix’s average quarter-on-quarter growth was 6%, so although Q2 is known to be a seasonally weak quarter for streaming services, White believes Netflix will post strong results. Going forward, White foresees sales growth of 31% year over year and EPS of $0.93.
It will be important for Netflix to post strong results throughout the remainder of 2019 to fend off worry on Wall Street about increased competition. Both Disney and Apple are set to launch streaming services in the fall flush with original content. Although White expects revenue growth to be strong, he doesn’t predict positive free cash flow for Netflix this year or in 2020.
Netflix is expected to spend around $15 billion on content this year, an investment that the service hopes will keep subscribers from migrating to the new streaming platforms Disney and Apple are launching. Also, with Netflix operating in 190 countries the company is being forced to add content tailored to international markets, which has driven up its content budget significantly.
All in all, White is certainly not the first analyst with a bullish rating for the streaming giant, as TipRanks analytics showcasing Netflix stock as a Strong Buy. With an average price target of $420.31, analysts are predicting an upside of nearly 11%. In total, the stock has received 24 ‘buy’ ratings vs. just 5 ‘hold’ and 1 ‘sell’ ratings in the last three months. (See NFLX’s price targets and analyst ratings on TipRanks)