Netflix Earnings and Subscriber Outlook

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    Streaming giant Netflix report third quarter earnings after…



    After last week’s rout and so many funds long this name and with many at higher levels this will be a nervous report. A timely upgrade by Citi boosted it nearly 6% Friday. So we know the flavor if they beat. That content number is what I am watching.

    Super Harley

    [b][color=red]Wedbush has an Underperform rating with a $125 price target.

    [/color][/b]Wedbush estimates $0.68 in EPS and $3.988 billion in revenue, sees domestic and international streaming subscriber net additions of 0.65 million and 4.35 million.

    This year’s May-to-June Originals were light compared to last year’s, which in our view was the primary driver for Q2’s total subscriber miss (5.15 million global net adds vs. guidance of 6.20 million). The content comparison for Q3 appears more favorable, and we expect lower quarterly churn to result in net additions that come in modestly above management guidance of 5.00 million global net adds (vs. Q3:17’s 5.30 million global net adds). At a minimum, we expect Q3 net upside of 0.1 million domestic and 0.2 million international subscribers, which would reflect sequential growth from Q2’s 0.67 million and 4.47 million.


    Netflix Inc.$NFLX maintained as Buy at Goldman Sachs BUT $GS lowered price target to $430 from $470 ahead of earnings report.


    [b]Morgan Stanley cuts its 12-month price target for Netflix

    “Longer term, we expect Netflix will continue to invest and market behind its ramping global original programming and we raise long-term marketing expenses [as a percent] of revenues by ~100 [basis points versus our] prior forecast,” Morgan Stanley analyst Benjamin Swinburne said in a note.

    “We also raise the incremental cost of debt based on rising interest rates, with Netflix still needing to raise an additional ~$5 [billion] of debt over the next two years before reaching positive free cash flow in 2021.”

    Morgan Stanley now has a price target on Netflix of $450 a share, down from $480 a share.


    Deutsche Bank Bryan Kraft expects Netflix to report in line and will also give a “better than expected” forecast for the fourth quarter.

    “The risk/reward skews to the upside going into this earnings report. That said, we think the upside is limited in the short term.”

    Deutsche Bank has a $350 a share price target on Netflix.


    Goldman Sachs cut Netflix price target to $430 from $470 Ahead of Earnings

    GS says content spending is expected to pick up in the fourth quarter, which could lead to lower guidance from the company.

    It should be noted Goldman’s analyst Heath Terry remains markedly bullish, and is well above Wall Street’s average $380 target.

    “While 3rd party data has most investors anticipating net subscriber additions beyond management’s July guidance, we believe that has been balanced by expectations for more conservative 4Q guidance,” analyst Heath Terry

    Goldman expects Netflix to report growth of 850,000 domestic subscribers and 4.7 million internationally, topping the company’s guidance of 650,000 and 4.35 million respectively, as “consensus continued to underestimate the “size of Netflix’s global addressable market.”

    Netflix is in the process of spending on content this year is expected to ramp up in the final quarter of the year, eating into the company’s bottom line. The price target cut also “reflects the contraction in broader internet multiples,” according to Goldman Sachs, which now factors in a 60x forward earnings-to-EBITDA ratio in its model where it had previously used 65.

    “Considering the robust line-up of originals for 4Q, even as it’s likely not all have been announced as of yet, our forecast for 7.7 million total net adds, roughly in-line with consensus of 7.7 million and vs. 8.3 million in 4Q17, could prove conservative,” said Terry.


    Lisa Abramowicz Verified account @lisaabramowicz1

    Netflix is borrowing another $2 billion from bond investors.

    This will bring the company’s total debt over $10 billion, much of which it is using to pay for programming.

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