Netflix's Long-Term Opportunity Is Substantial, Says Cantor Fitzgerald

Netflix reported Q2 earnings per share at $0.09 vs. estimates of $0.02 and revenue of $2.015 billion vs. estimates of $2.11 billion, but what scared investors was the disappointing subscriber growth.

"We are growing, but not as fast as we would like or have been," said a Netflix representative. The company reported a subscriber growth of 1.7 million, below forecasts of 2.5 million net new members.

Cantor Fitzgerald's View

Cantor Fitzgerald's Youssef Squali maintains Netflix's Buy rating, while lowering the company's price target from $130.00 to $120.00 remaining optimistic on Netflix's long-term future.

"Netflix remains one of the toughest Internet stocks to call quarter-to-quarter, given volatility in subscriber trends precipitated by multiple price hikes and incessant country launches," stated Squali. That said, Netflix should be looked at as a "long-term opportunity," which remains "substantial and worthy of investment," according to the Fitzgerald analyst.

Related Link: Big Banks Cut Price Targets Following Netflix's Q2 Results

After disregarding Netflix's subscriber growth flop as only a short-term concern, Squali highlighted the company's strengths.

Showing Continued Strength

The analyst said, "Continued strength in gross subscription additions in 2Q and rising ARPU show that underlying demand remains healthy." Additionally, Netflix's growing dedication to exclusive content in combination with "massive intellectual expansion and localization of content should drive sustained growth over time," stated Squali.

Future Hurdles

Ongoing "un-grandfathering" of the $7.99 and $8.99 subscribers and the viewer-taking the Olympics have the potential to create further short-term volatility, but do not threaten the company's long-term opportunities at a significant level, said Squali.

According to TipRanks, Youssef Squali is among the best analysts covering Netflix with a success rate of 70 percent and an average return per recommendation of +15.4 percent. The analyst is ranked 5 out of 4,064 analysts.

At time of writing, Netflix traded at $84.84, down 14.14 percent on the day.

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