Analysts Weigh In On Netflix's Rocky Quarter

Photo courtesy of Netflix

Netflix, Inc. NFLX reported second-quarter results highlighted by an uncharacteristic decline in U.S. subscribers while international subscriber adds missed expectations. Here is a summary of how some of the Street's top analysts reacted to the print.

The Analysts

Morgan Stanley's Benjamin Swinburne maintains an Overweight rating on Netflix with a $450 price target.

Raymond James' Justin Patterson maintains at Strong Buy, price target lowered from $470 to $450.

KeyBanc Capital Markets' Andy Hargreaves maintains at Sector Weight.

Shares of Netflix were trading lower by 11% to $321.25 on Thursday.

Morgan Stanley: No Reason To Overreact

Netflix's report shows a net subscriber addition that fell short of estimates by more than 2 million, Swinburne wrote in a note. Netflix has shown one net subscriber addition miss once a year for the past three years -- two of which happened in the seasonally light second quarter.

While the magnitude of the subscriber miss looks large, Swinburne said it's roughly consistent compared to prior misses when adjusting for the relative size of the business.

Netflix reported a miss that has some investors asking if anything changed in the past three months. Simply put, the analyst wrote, "we do not believe" any notable changes occurred. In fact, there's no reason to "overreact" as the company could still end 2019 with record net additions and nearly double-digit average revenue per user growth.

Raymond James: Bull And Bear Takeaways

Netflix's quarter brings up legitimate "controversy" if the streaming video company reached a maturation stage in the cycle, Patterson wrote, but the company has now grown to a size where subscriber misses has minimal impact on revenue given recent price increases. Also, it should be noted Netflix typically ramps subscriber adds in the back half of a given year.

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