Categories Analysis, Earnings

Earnings Preview: Is Netflix still a safe bet?

The king of streaming is in a high place now. But it is not where you can’t reach. While many would say the investment potential of Netflix is reaching a threshold limit, the streaming giant makes it a point to prove them wrong.

When the stock was down on Thursday, Citi told investors that it was a golden opportunity. Putting Netflix at a target price of $375 a share, the research wing of the bank made it clear that it was confident of Netflix hitting consensus out of the park.

And on Friday, shares jumped almost 4% higher than where it closed the previous day. The Citi target was 17% higher than Thursday’s close. “We view the recent sell-off as an opportunity to own a high-quality, recurring revenue franchise with attractive upside potential,” Citi said.

Citi forecasts a 0.7-million growth domestically and a 4.75-million hike in subscribers internationally for the third quarter

With fears gripping the equity market, especially in tech, this valuation came as positivity check for Netflix and its peers. Over the past five days before Friday, Netflix had slid almost 12%, putting it 22% lower over the last three months. This was bad, especially when compared to the S&P 500, which only fell 6% in the five-day period.

Countries-with-high-Netflix-user-penetration-in-2018

The bond market went to correct itself after the Fed hiked yield rates earlier this week, and its effects were felt profoundly on the equities as well, triggering a massive sell-off. Do check out our coverage on the same.

The S&P 500 slide: Is it time to run to the hills?

Coming back to Netflix, along with robust original programming and its latest stint in Canada, Citi forecasted a 0.7 million growth domestically and a 4.75-million hike in subscribers internationally in the third quarter. And they specified that these were conservative estimates. The analysts also touted that the fourth quarter growth could hit 1.65 million domestically and 5.75 million.

Analysts also see a 27% hike in total revenue growth for the streaming giant in 2019, higher than the 24% consensus. Operating income estimate is at $3.4 million, higher than consensus of $2.7 million while EPS is expected to hit $5.69 against $4.45 a share.

Netflix shares are up 67% this year and the surge is just starting. Signs show that it could be an ideal time to invest in the streaming industry, and what better candidate than Netflix!

Netflix stock slides on disappointing subscriber growth in Q2

 

RELATED: Headwinds to Netflix’s growth

RELATED: Netflix Q2 2018 earnings call transcript

RELATED: Netflix’s ‘Ultra’ plan

 

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