Here's what every major Wall Street analyst had to say about Netflix's blockbuster earnings report

Here's what every major Wall Street analyst had to say about Netflix's blockbuster earnings report

October 17, 2018

Wall Street was electrified by Netflix’s hefty earnings beat and subscriber growth, especially in overseas markets. The Street’s top analysts were largely bullish in the wake of the report, pushing the stock even higher in premarket trading Tuesday. They were also largely relieved that the subscriber miss in the prior quarter and subsequent stock plunge was just a “blip.”

As of the latest reading, the stock rose 13 percent before the bell Wednesday. Here’s what analysts thought of Netflix’s financial performance.

Bank of America (Buy)

“Stellar third quarter, net subscriber adds well above the Street. … Netflix came in above on both U.S. and international net subscriber adds, with 1.09 million U.S. and 5.87 million intl vs. consensus estimates of 657,000 and 4.39 million. International net add growth was noted to be broad based, with Asia highlighted as a key area of strength. Additionally, the fourth-quarter net add guide of 9.4 million implies total subscribers of 146.5 million by year-end 2018, which is above our pre-2Q’18 forecast of 142.6 million subscribers. In effect, 3Q net adds and the 4Q guide erase the 2Q’18 miss, and returns Netflix’s growth trajectory to where it had been earlier this year. Profitability remains healthy.”

Analyst Nat Schindler raises Bank of America’s price target to $440 from $410, implying 27 percent upside thanks to the improved subscriber growth outlook.

Goldman Sachs (Buy)

“Netflix third-quarter results exceeded consensus expectations in both the US and International segments as the correlation between content spend and subscriber net adds strengthened for the sixth consecutive quarter. Fourth-quarter guidance far exceeded consensus expectations, reflecting the strength of the content line-up through year-end, amplification from newer distribution partnerships and growth in the addressable audience, particularly in earlier stage mobile-first markets. As Netflix subscriber adds continue to exceed expectations and it approaches an inflection point in cash profitability following the current investment period in advance of the loss of Disney content late next year, we believe shares of Netflix will continue to significantly outperform.”

Analyst Heath Terry ups Goldman’s price target to $480 from $430 to reflect “the faster than expected addition of subscribers to the platform.” The new estimate implies 38 percent upside.

UBS (Neutral)

“Against a wave of idiosyncratic fears, Netflix overall operating performance will allow Netflix bulls to ‘win the day.’ In analyzing the results, we were most constructive on domestic trends (clearly signs of any domestic maturation are still not showing in results). In the international business, we expect subscriber beat and guide to be the focus of investors in driving the stock to recover from recent underperformance. Looking at commentary for fourth-quarter 2018 and fiscal year 2019, we don’t see much in the way of positive changes to operating estimates.”

UBS’s Eric Sheridan increases his price target to $400, implying 15 percent upside.

J.P. Morgan (Overweight)

“Overall, we believe third-quarter results and the fourth quarter guide indicate that Netflix is back on track. While quarters can be lumpy, the bigger picture path is consistent, and we continue to believe there is significant growth potential ahead, with Netflix on track to have 200 million global subscribers in 2020-2021. Pushback may come from some who view Netflix estimates as merely returning to their six months ago levels and with the stock appreciating about 25 percent during that time, well ahead of the S&P 500’s 5 percent and most other tech names. That could curb some of the additional near-term upside beyond the 11 percent after-market move, but we believe content is strong into the fourth quarter and 2019, and Netflix could again deliver more net adds next year than this year, particularly as India and Japan gain greater traction.”

Doug Anmuth, one of J.P. Morgan’s technology analysts, raised his price target on Netflix to $450 from $415, implying 29 percent upside.

Morgan Stanley (Buy)

“After the second quarter shortfall vs. guidance, third quarter’s outperformance reminds us that the long-term trend is clear. Netflix has built something new, a truly global vertically integrated content production and distribution business. But more importantly, it has consistently reinvested its near-term success into deepening its competitive moat. This reinvestment consistency, along with a focus on its core business, has allowed it to find success – creative and financial – in widely diverse markets around the world. Netflix aims for steady margin improvement, and reinvests any upside back into the business to maximize the long-term opportunity.”

Analyst Benjamin Swinburne has a price target of $450 on shares of Netflix, implying 29 percent upside.

RBC Capital Markets (Outperform)

“Following a weak second quarter, Netflix reported beat and raise subscriptions with robust contribution profit across domestic and international segments. Long-term fundamental trends remain very, very, very much intact. Streaming revenue and subscription additions are still set to accelerate in 2018.

We don’t believe in ‘open-ended growth stories.’ But, darn, Netflix is about as close to one as you can find in today’s market. Global Subs Adds are accelerating in ’18 – per our extensive survey work, the Netflix consumer value prop is compelling. Global Streaming Revenue is accelerating too — pricing power surely helps.”

Analyst Mark Mahaney bumped his price target on the company to $450 from $440, forecasting 29 percent upside.

Barclays (Overweight)

“Netflix: Nailed it. Given the miss last quarter, there was understandable worry going into earnings especially around fourth-quarter net add guidance. Netflix beat third-quarter net add expectations handily (6.96 million actual vs 5 million guide) and its fourth-quarter net adds guide at 9.4 million came 23 percent higher than consensus and our above- consensus 8.1 million estimate. Management indicated that even their most popular shows tend to be low single digit percentage of hours viewed which implies dependence on individuals shows isn’t material which may be offsetting the impact of major shows missing from the fourth quarter.”

Analyst Kannan Venkateshwar increased the Barclays price target on Netflix stock to $430 from $415, implying 24 percent upside.

Nomura Instinet (Neutral)

“Net adds were significantly ahead of our estimates and consensus, driven by strong global growth, including in Asia. Revenue was in line with the outlook, and EBITDA was moderately ahead. Earnings per share also saw benefits of over $45 million from Eurobond remeasurement and tax reform impacts. Management noted an increased focus on owned original first-run content, which has the potential to lower costs by avoiding third-party licensing markups. International original content is another point of emphasis, and the company plans to continue to invest heavily in building out local content libraries.”

Nomura Instinet analyst Mark Kelley held his price target steady at $370, 6.8 percent above Tuesday’s closing price.

BMO Capital Markets (Outperform)

“Confirmed: Last quarter was a blip, not a trend, reiterate outperform. Subscriber trajectory is back on track with a strong third-quarter beat and positive fourth-quarter guidance. Drivers included more non-English original content, more efficient marketing focused on originals, and the continued contribution of distribution partnerships. Management expects 2019 free cash flow losses to be roughly in line with 2018, and we expect improvement in 2020. And while very small now, we continue to believe new revenues like licensing can drive more long-term dynamism and diversification that builds off of owned intellectual property.”

Analyst Daniel Salmon raised his target to $440 from $400, implying 27 percent upside.

— CNBC’s
Michael Bloom
contributed reporting.

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