What analysts predict
Investors’ concerns about a lack of new subscribers are unfounded, and assistance may be on the way, they wrote.
The stock, which was widely regarded as one of the biggest beneficiaries of stay-at-home moms, is down 1.5 percent this year.
Analysts anticipate the following earnings from Netflix:
“Although this crisis has resulted in more erratic subscriber trends, we believe it has acted as a catalyst in introducing more consumers to Netflix, and we believe this story has a long runway of growth in the coming years,” investment firm Monness Crespi Hardt stated this week.
The firm believes that the Netflix pipeline is so full that concerns about adding customers are exaggerated.
“We also expect Netflix content to improve in H2:2021, providing an opportunity to attract new paid subscribers,” according to Monness analyst Brian White.
Other analysts, such as Stifel’s Scott Devitt, had a lingering sense of “softer expectations.”
Nonetheless, Devitt believes investors should look beyond this earnings report.
Meanwhile, Nat Schindler, a Bank of America analyst, went so far as to call this quarter’s report “irrelevant.”
“We expect big content launches in the second half of the year to be drivers of [subscription] growth over the next year,” he wrote.
Schindler acknowledged that the company would face difficult comparisons in the near future, but said it had what it took to withstand regulatory scrutiny and compete.
Nonetheless, Cowen analyst John Blackledge predicted in a client preview note earlier this month that Netflix could surprise and deliver higher-than-expected subscriber additions.
“We see NFLX as a pioneer in online streaming, with further expected growth in subscriptions in the United States and long-term subscription growth internationally in existing and new markets,” Blackledge said.
However, when it comes to content, according to investment firm Baird, there is only one option.
“With the world’s leading content portfolio, we believe NFLX remains the ‘must have’ streaming provider,” said analyst Will Power.
Morgan Stanley has assigned an Overweight rating to the company.
“Results for the streaming leaders this summer will most likely put the market’s faith in long-term growth to the test, as net additions are down significantly year on year. While investors are familiar with the net adds ‘pull-forward’ debate, we highlight how the pandemic slowed Netflix’s content spending in this report. The effects of the 2020 slowdown can be seen in today’s content offering, which is likely contributing to softer 1H21 net additions.”
Buy rating for Deutsche Bank
“The data we track (Google Trends) was not particularly inspiring in terms of 2Q, but neither was management’s 2Q guidance for 1M net adds; thus, we don’t necessarily see a negative surprise lurking. … We believe that content is important, and that the second half slate will drive an increase in net additions. We estimate that just to maintain the base, servicing churn necessitates 15-16M quarterly gross adds.”
Jefferies has a Buy rating.
“Covid has pushed much of NFLX’s most anticipated content into the second half of 2021 and 2022. Historically, successful content has been a catalyst for net sub growth, so we expect investors to focus heavily on the build-up and ultimate success of upcoming content following 2Q earnings. … As a result, we believe that content performance over the next 12 months will have a significant impact on how investors view NFLX’s long-term growth.”
Cowen has an outperform rating.
“According to our proprietary recurring U.S. survey, NFLX continues to lead living room TV, with 28% of respondents saying NFLX has the best video content, far ahead of other streaming and linear services. … While engagement is high and churn is low, investors are focused on the timing of the pull forward effect, with expectations for a weighted content slate in 2H21, which could drive higher gross adds. In terms of NFLX content relative to other platforms, our 2Q21 US survey data from our proprietary monthly tracker remained positive.”
Buy rating for Monness Crespi Hardt
“Although the crisis has resulted in more erratic subscriber trends, we believe it has acted as a catalyst in introducing more consumers to Netflix, and we believe this story has a long runway of growth in the coming years.” We anticipate a 19% increase. We believe Netflix will at least meet our $7.288 billion revenue estimate for 2Q:21 and slightly exceed our $3.09 EPS projection. … We also expect Netflix content to improve in H2:2021.”
KeyBanc has an overweight rating.
“However, we believe a series of catalysts is forming that will provide NFLX investors with a favorable risk/reward over the next 12-18 months.” We believe that: 1) the relative net add disparity between Netflix and peers will narrow (due to Netflix’s content launches and competitors facing gross add and churn challenges); 2) further price increases will demonstrate pricing power (likely across geographies throughout 2022); and 3) cash deployment will be toward content and buybacks.”
Overweight rating at Barclays
“We like Netflix because of (a) the virtuous cycle of content/distribution scale and consumer inertia; (b) the resulting pricing power; (c) the international [total addressable market]; (d) management and execution quality; and (e) longer-term operating leverage. While the valuation does factor in many years of growth, the company has consistently outperformed top-line expectations.”
UBS has a Buy rating.
We continue to believe Netflix is a [long-term] secular winner with significant scale, penetration upside, and pricing power – all of which support higher margins and ramping [free cash flow] – with franchise extension as an option.”
Canaccord Genuity – Buy rating
“We anticipate another quarter of modest subscriber growth in Q2, though investors will likely be focused on how much this metric can recover during 2H21 as consumer behavior normalizes and the release schedule tightens.
Outperform rating for Evercore ISI
“Based on intra-quarter data points, we believe the Street’s 1.1MM Global Net Adds estimates are in the ballpark. That said, we believe Q3 guidance will be the key metric to watch, particularly as global mobility continues to improve, and we believe the Street’s 5.8MM Net Adds estimates are modestly aggressive, given a somewhat soft content slate as well as competitive launches from Disney and HBO across international markets, which may cause churn to become a more material factor in NFLX’s Global Net Adds in the near term.
Wedbush has a rating of underperform.
“While it is certainly possible for Netflix to increase free cash flow faster by reducing content spending, we believe that competition for new subscribers will limit Netflix’s ability to do so, as fickle subscribers from at or below median income households are likely to churn more frequently in the future and rotate among the many new services offered.”
Stifel – Buy recommendation
“Our expectations for the quarter are broadly in line with the market. Pandemic-related pullbacks in recent quarters, combined with a lighter content slate as a result of production delays last year, have resulted in lowered expectations for 2Q.
Credit Suisse has received an outperform rating.
“Our tracking of Netflix releases, combined with management commentary over the past year, suggests a strong August-December content slate with numerous potential top-of-funnel titles – and we anticipate a stronger full year slate in 2022 than in 2021, led by “Stranger Things” Season 5 and “Bridgerton” Season 2. … Not to mention