Netflix stock (NASDAQ: NFLX) has tumbled about 33% since the streaming giant reported fourth-quarter results in January. The primary issue three months ago was a disappointing outlook for Netflix’s first-quarter subscriber growth. Netflix projected 2.5 million net new subscriber additions for the March quarter, well shy of the previous Street consensus forecast at 5.7 million. Now, consensus calls for 2.8 million net adds in the quarter, but that number may be a little stale, and the real result could be considerably lower.
Netflix’s first-quarter earnings report will land after the close of trading on Tuesday. The company has projected revenue for the quarter of $7.9 billion, up 10.3% from a year earlier. The current Street consensus as tracked by Factset calls for $7.94 billion in revenue, with GAAP earnings of $2.95 a share, which would be down from $3.75 a year earlier. On a non-GAAP basis, the Street expects $3.10 a share, down from $3.99.
Meanwhile, the company’s outlook for the June quarter’s net subscriber additions is likely to be key to the Street’s reaction to the report—current consensus calls for 2.5 million net adds. Keep in mind that the second quarter has historically been weak for Netflix. Last year, the company added just 1.5 million subs in the June quarter, the low point for the year. In 2019, before the pandemic, the June quarter was also noticeably weaker than the other three quarters that year.
One factor that may not be in the Street consensus for the June quarter, however, is that Netflix has suspended operations in Russia, where it reportedly has about 1 million subscribers. Remember that the company reports net—not gross—subscriber additions. So depending on how Netflix computes the number, that would be a million subscribers off the top.
Monness Crespi Hardt analyst Brian White, who has a Neutral rating on Netflix shares, says the company’s slow growth will likely continue to weigh on the stock’s performance.
“Although the content on Netflix has been exceptional over the past couple of years, nefarious forces appear to be lurking beneath the surface of Netflix’s post-lockdown recovery, either in the form of a slower-than-expected healing process after the pandemic-driven pull forward, a weaker-than-expected global economy, or a platform that has simply hit a near-term growth wall,” White writes in a preview of first-quarter results. He also notes that Netflix’s guidance points to the company’s slowest revenue growth since the 2012 fourth quarter.
J.P. Morgan analyst Doug Anmuth maintains an Overweight rating and a $605 target price on Netflix shares, which ended last week at around $350. He projects just 1 million net adds for the second quarter. In addition to seasonal weakness, there are signs of growing out-of-the-house consumer activity in the current quarter, which could muffle growth, he writes. Net growth could also be reduced by recent price increases in the U.S., Canada, the U.K., and Ireland. In short, he thinks guidance for 1 million net adds might prove optimistic. But he remains a long-term bull and expects improved growth in the second half.
Last week, BMO Capital analyst Daniel Salmon trimmed his first-quarter subscriber forecast to 1.76 million from 2.48 million, largely to reflect the loss of the company’s Russian subscribers. He also cut his price target for Netflix stock to $640 from $650 but maintained his Outperform rating. While subscriber trends still matter, he says that investors are paying more attention now to the path to profitability for streaming sector players—and the analyst notes that his free cash flow estimates are above consensus.
Piper Sandler analyst Thomas Champion is projecting 2.3 million net adds for the March quarter, and 1.9 million for the June quarter. But he likewise maintains his Overweight rating and $562 target price on the stock, noting that free cash flow should be positive in 2022. “In our view, the story has not changed and we think the recent selloff provides a buying opportunity,” he writes.
Champion also writes that a Piper survey of Netflix customers found interest in the company adding an advertising-supported tier. While this idea continues to float around the Street, management has consistently declined any interest in selling ads.
Netflix Short (Sell) Enter at: 326.07 T.P_1: 290.45 T.P_2: 249.75 S.L: 376.12
All information on this website is of a general nature. The information is not adapted to conditions that are specific to your person or entity. The information provided can not be considered as personal, professional or legal advice or investment advice to the user.
This website and all information is intended for educational purposes only and does not give financial advice. Signal Factory is not a service to provide legal and financial advice; any information provided here is only the personal opinion of the author (not advice or financial advice in any sense, and in the sense of any act, ordinance or law of any country) and must not be used for financial activities. Signal Factory does not offer, operate or provide financial, brokerage, commercial or investment services and is not a financial advisor. Rather, Signal Factory is an educational site and a platform for exchanging Forex information. Whenever information is disclosed, whether express or implied, about profit or revenue, it is not a guarantee. No method or trading system ensures that it will generate a profit, so always remember that trade can lead to a loss. Trading responsibility, whether resulting in profits or losses, is yours and you must agree not to hold Signal Factory or other information providers that are responsible in any way whatsoever. The use of the system means that the user accepts Disclaimer and Terms of Use.
Signal Factory is not represented as a registered investment consultant or brokerage dealer nor offers to buy or sell any of the financial instruments mentioned in the service offered.
While Signal Factory believes that the content provided is accurate, there are no explicit or implied warranties of accuracy. The information provided is believed to be reliable; Signal Factory does not guarantee the accuracy or completeness of the information provided. Third parties refer to Signal Factory to provide technology and information if a third party fails, and then there is a risk that the information may be delayed or not delivered at all.
All information and comments contained on this website, including but not limited to, opinions, analyzes, news, prices, research, and general, do not constitute investment advice or an invitation to buy or sell any type of instrument. Signal Factory assumes no responsibility for any loss or damage that may result, directly or indirectly, from the use or dependence on such information.
All information contained on this web site is a personal opinion or belief of the author. None of these data is a recommendation or financial advice in any sense, also within the meaning of any commercial act or law. Writers, publishers and affiliates of Signal Factory are not responsible for your trading in any way.
The information and opinions contained in the site are provided for information only and for educational reasons, should never be considered as direct or indirect advice to open a trading account and / or invest money in Forex trading with any Forex company . Signal Factory assumes no responsibility for any decisions taken by the user to create a merchant account with any of the brokers listed on this website. Anyone who decides to set up a merchant account or use the services, free of charge or paid, to any of the Forex companies mentioned on this website, bears full responsibility for their actions.
Any institution that offers a service and is listed on this website, including forex brokers, financial companies and other institutions, is present only for informational purposes. All ratings, ratings, banners, reviews, or other information found for any of the above-mentioned institutions are provided in a strictly objective manner and according to the best possible reflection of the materials on the official website of the company.
Forex trading is potentially high risk and may not be suitable for all investors. The high level of leverage can work both for and against merchants. Before each Forex investment, you should carefully consider your goals, past experience and risk level. The opinions and data contained on this site should not be considered as suggestions or advice for the sale or purchase of currency or other instruments. Past results do not show or guarantee future results.
Neither Signal Factory nor its affiliates ensure the accuracy of the content provided on this Site. You explicitly agree that viewing, visiting or using this website is at your own risk.
