Netflix’s 2Q 2017 earnings report is set for release on Monday after closing bell, and investors seem pretty optimistic as the company’s stock continues to push steadily higher. Some analysts are also optimistic about the next earnings release, although other analysts have warned recently that Netflix may be starting to struggle domestically, and a hedge fund manager who rode Apple and Amazon to a sizeable 78% return last year is shorting Netflix.
Netflix’s 2Q 2017 earnings expected to be solid
MKM Partners analyst Rob Sanderson remains bullish going into Netflix’s 2Q 2017 earnings report. He’s expecting the report to reflect a slightly better than seasonal quarter. He said in a note to investors dated July 10 that the company’s content line-up was strong during a quarter that tends to be the weakest in terms of seasonality.
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Consensus expects 800,000 domestic paid net subscribers and 2.7 million international paid net adds, both of which are in line with management’s guidance, although he sees them as potentially conservative. He added that price-related churn is still skewing subscriber comparisons.
Looking past Netflix’s 2Q 2017 earnings to the third quarter
Sanderson feels that original content has been driving subscriber growth for the company, especially overseas. This year Netflix expects to boost the number of original programming hours by 65% to 70%, and management has said that the slate of original content will greatly improve in the second half of the year compared to the first half.
The analyst believes Netflix could surprise to the upside for the third quarter. He sees the third-quarter outlook as the most important part of Netflix’s 2Q 2017 earnings report, as it tends to be a much greater contributor to the company’s full-year subscriber numbers. The FactSet consensus for the third quarter stands at 800,000 domestic adds and 3.5 million international adds.
Sanderson has a Buy rating and $195 price target on Netflix shares.
Gullane Capital sells Netflix short
Not everyone is so positive on the company right now. Gullane Capital is shorting Netflix, according to MarketWatch. Richard “Trip” Miller and his team managed a 78% return last year after fees, riding on their long positions in tech bigwigs like Apple and Amazon. He’s still bullish on them because their cash flow is so high that it’s easy for them to get into new industries, but he’s been bearish on Netflix for quite some time.
He told MarketWatch that he shorted the video streaming firm at “a blended $114” per share in November and December 2015 but then covered the position at around $90 per share in July 2016. He also said that he then “made a short-term stupid error” by shorting Netflix again at more than $100 per share this past fall.
Netflix stock has been on a steady upward march, but Miller expects the company’s massive $1.5 billion annual cash burn rate, U.S. market saturation, and competition to eventually catch up to it. Shares of Netflix rose by as much as 1.83% to $157.17 during regular trading hours on Wednesday.