Netflix (NFLX) is releasing its Q2 earnings on July 17th and Wall Street is watching to ensure the company keeps up its strong growth. In the first quarter, Netflix’s earnings and user growth thoroughly outpaced analyst expectations, which has further raised the already sky-high growth forecasts for the company. 9.6 million paid members joined the platform in the first quarter, a staggering figure for a company that has already penetrated much of the streaming market in North America.
SunTrust Robinson analyst Matthew Thornton believes Netflix’s second-quarter results to be in-line with his original predictions. Thornton reiterated his Buy rating and $402 price target on Netflix (To watch Thornton’s price target, click here).
Second-quarter search interest for Netflix’s new content was strong, growing 60% from 2018’s Q2 results. The quarter’s key releases were the Ted Bundy Movie, Lucifer, Dead to Me, and Black Mirror. Thornton predicts international paid member ads to reach 4.8 million in Q2, which is consistent with the consensus prediction from analysts on Wall Street.
Unlike the second-quarter, Thornton believes that the third-quarter guidance will be above what the consensus is on Wall Street. He expects search interest in Netflix’s releases during the upcoming quarter to be strong, largely due to returning shows that are crucial in Netflix’s owned content arsenal. Some of the content being released in the third quarter includes Stranger Things, 13 Reasons Why, Orange Is The New Black, and Mindhunter. Thornton feels that this loaded release will propel Netflix to 5.6 million international paid member additions.
Going forward, Thornton believes there are three factors that will drive Netflix’s growth and confirm his Buy call on the stock. The massive content release coming up in the second half of 2019 should help bring in more new customers. Netflix has also optimizied pricing by raising prices significantly in certain markets while lowering prices in others, showing that they are feeling out what the reservation price is for customers in different markets. Finally, Thornton thinks that Netflix has a “long-term opportunity around consumer merchandising, product placement, box office, and content licensing.”
Although Netflix is not expected to blow Wall Street away with their Q2 results, Thornton predicts that their Q3 guidance will be strong, which could set the stage for a fantastic second-half of 2019. TipRanks’ analysis of 30 analyst ratings on Netflix in the last 3 months shows that there is a Strong Buy consensus on the stock. 24 analysts have Buy ratings on Netflix, 5 recommend Holding the stock, and 1 advises to Sell. The average price target on Netflix is $422.42, which is a 12.5% upside on the current stock price. (See NFLX’s price targets and analyst ratings on TipRanks)