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Is Netflix a Buy Ahead of Earnings? Analyst Weighs In

Is Netflix a Buy Ahead of Earnings? Analyst Weighs In


One of Wall Street’s huge hitters will step as much as the earnings plate this week; Netflix (NFLX) will report 1Q21 outcomes after the bell on Tuesday.

Ahead of the print, Raymond James’ Andrew Marok has been assessing the streaming king’s quarter and factors out a number of gadgets to regulate in Netflix’ quarterly assertion. While the analyst continues to view Netflix as a “long-term winner in the video-on-demand space,” there are specific near-term elements which might put a dampener on proceedings.

These embody: “1) risk to the pace of subscriber additions post-pandemic; 2) the pandemic’s effects on content releases into 2021; and 3) the impact of price releases on subscriber retention, especially given scaling of competing direct-to-consumer services, most of which are priced at a discount to Netflix.”

The outsized demand for Netflix’ service in the course of the peak of the pandemic helped the corporate obtain report new subscribers in the identical interval final 12 months. Subscriber tendencies will likely be a key merchandise to regulate. Although Marok anticipates “slightly below consensus 1Q21 net subscriber additions,” it’s the subsequent quarter which could possibly be extra problematic on this entrance.

“We see increased risk to net additions estimates – perhaps less so for 1Q21 as reopening momentum was weighted toward the back of the quarter, but increasingly for 2Q21 (which spurs our below-consensus 2Q net adds outlook),” the analyst famous.

Regarding Marok’s second level, because the pandemic raged, Netflix additionally needed to halt productions as stay-at-home mandates got here into play. The analyst will likely be eager to glean insights “on release slates into 2Q and content plans as production paces have returned to close to normal.”

As for 3, in sure areas, together with the U.S., U.Okay., and Ireland, Netflix just lately raised costs. This, alongside the departure of the Office – Netflix’ most watched collection – is a trigger for concern. Marok sees “both of these factors as potential sources for increased churn in 1Q21.” Although the corporate has up to now dealt fairly effectively with the churn round worth hikes, the very fact the brand new costs got here nearly concurrently the reopenings “adds another degree of risk not present in a typical price raise cycle.”

To this finish, the analyst charges NFLX inventory a Market Perform (i.e. Hold) and has no mounted worth goal in thoughts for the shares. (To watch Marok’s observe report, click here)

Marok, nonetheless, is amongst a minority on Wall Street; wanting on the consensus breakdown, 22 Buys, 5 Holds and 4 Sells add as much as a Moderate Buy consensus ranking. The forecast is for 12-months good points of 11.5%, contemplating the common worth goal is available in at $618.41. (See NFLX stock analysis on TipRanks)

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Disclaimer: The opinions expressed on this article are solely these of the featured analyst. The content material is meant for use for informational functions solely. It is essential to do your personal evaluation earlier than making any funding.


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