Netflix Earnings Preview: Stock Hits Record High In Countdown To Results

Netflix Earnings Preview: Stock Hits Record High In Countdown To Results
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Netflix, Inc. (NASDAQ:NFLX) is scheduled to release its next earnings report this afternoon after closing bell. Consensus currently stands at 41 cents per share in earnings on $3.28 billion in revenue. NFLX stock soared to yet another record high in early trading today, climbing by nearly 3% to as high as $226.68 in the hours leading up to the Q4 Netflix earnings release.

What to expect in Q4 Netflix earnings release

As has been the case in recent years, streaming adds will again be a focus for Netflix earnings. The Street is forecasting 1.27 million domestic subscriber adds, which is a little ahead of the company’s guidance at 1.25 million. Consensus for international subscriber adds stands at 5.05 million, which matches management’s guide.

Stifel analyst Scott Devitt noted that Netflix beat its own outlook for subscriber adds in the year-ago quarter by 1.85 million, coming in at 7.05 million in total. For all of 2018, he expects the company to add 4.6 million domestic subscribers and 17.36 million international subscribers. Both estimates are ahead of the consensus numbers at 4.22 million and 16.7 million, respectively.

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Praise for Netflix’s latest price increase

JPMorgan analyst Doug Anmuth also said in a recent note that his estimates for Q4 subscriber adds are higher than the company’s own guide. While bears warned recently that the latest price increase could have had a negative impact on adds during the fourth quarter, Anmuth disagrees.

He praised the timing of the price increase, calling it “well-executed” with “tighter timing, no grandfathering and fewer headlines.” He also pointed out that the increase was mostly executed during the company’s most seasonally strong quarter in terms of gross adds. Further, he said that Q4 brought a slate of particularly strong new originals and that Netflix stepped up its marketing spend, particularly in the U.S.

For the current quarter, Anmuth expects Netflix to guide for about 1.25 million domestic adds, a 12% year-over-year decline, and about 3.75 million international adds, a 6.6% increase. He does expect the company to warn about a “modest negative impact” by the price increase and a potentially “modest” impact from the Winter Olympics coming up next month. However, he also noted that Netflix is up against an easier year-over-year comparison.

NFLX stock price target increased ahead of Netflix earnings

Even though NFLX stock continues to trade around record highs, Anmuth continues to like it. He said that even though “elevated expectations bring more risk this year, he sees plenty of room to add more subscribers. Additionally, he said NFLX is “less owned relative to other FANG names” and also “more insulated from regulatory concerns.”

Morgan Stanley analyst Benjamin Swinburne said in a note last week he has raised his price target for NFLX to $255, with his bull case rising to $300 at the year’s end. He noted that the stock is up almost 70% since the end of 2016 and is the strongest of all the FAANG names.

He’s especially bullish on Netflix’s international prospects as the acceleration in net adds over the last two years “shows that many markets remain in the sweet spot of the S-Curve.” He pointed out that 2017 was the first year in which Netflix didn’t add any more footprint versus the previous year, so year-over-year comparisons are “more meaningful.”

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