Market Overview

A Few Thoughts On Netflix Leading Into The Q3 Print

A Few Thoughts On Netflix Leading Into The Q3 Print
Related NFLX
36 Stocks Moving In Friday's Mid-Day Session
Hope Takes Flight: China Optimism Has Markets Looking Strong Ahead of Weekend
Stocks Today: Dow Jones Led By Home Depot, Chevron; China New Issue Soars (Investor's Business Daily)

If you break from your “Narcos” binge and peel away from that ever-expanding Netflix, Inc. (NASDAQ: NFLX) queue, Stifel Nicolaus saidyou’ll find yourself on an increasingly crowded couch.

Analysts estimate a 753,000 domestic and 3.65 million international swell in Netflix subscribers this quarter. If correct, the “healthy” trend would drive continued revenue growth and extend an impressive second-quarter gain of 5.2 million subscribers — a sum exceeding forecasts by 2 million.

“We estimate 30-percent year-over-year revenue growth in 3Q (in-line with guidance of 29.6 percent) as Netflix continues to benefit from last year’s price increase,” analyst Scott Devitt said in a Thursday note, anticipating operating margins of 6.8 percent. (See Devitt's track record here.)

Fourth Quarter Foresight

Netflix will again hike prices on premium subscription packages in November. The marginal raise will compound fourth-quarter user growth, justifying a 3-percent increase in Stifel’s quarterly revenue estimates.

“We expect the current price increase to be much less disruptive than last year,” Devitt said.

Combined with quarterly subscriber growth of 1.6 million domestic and 5 million international, the new round of price increases should drive operating leverage, according to Stifel. The research firm raised its 2018 average revenue per paying user, or ARPPU, growth estimates from 5 percent to 10 percent year-over-year.

Upcoming Catalysts

Reflective of the price increases, Stifel reiterated its Buy on Netflix and increased its target from $200 to $230. Netflix will report its third-quarter results Monday after market close, and management will follow the release with a 6 p.m. video interview.

Stifel will adjust expectations based on Netflix's plans for 2018 content spending. The streaming service recently reported a budget of $7 billion, which would drive year-over-year growth in the low teens against 2017 estimates of 31 percent.

At the time of publication, Netflix was trading at $194.95.

Related Links:
Not Everyone Jumping On The Netflix Bandwagon Ahead Of Q3 Earnings
Netflix: Buy The Disney Dip

Photo courtesy of Netflix.

Latest Ratings for NFLX

Jan 2019Goldman SachsMaintainsBuyBuy
Jan 2019Canaccord GenuityMaintainsBuyBuy
Jan 2019Bank of AmericaReiteratesBuyBuy

View More Analyst Ratings for NFLX
View the Latest Analyst Ratings

Posted-In: John Egbert Scott Devitt Stifel NicolausAnalyst Color Price Target Reiteration Analyst Ratings Best of Benzinga


Related Articles (NFLX)

View Comments and Join the Discussion!

Latest Ratings

CNPRBC CapitalUpgrades34.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

SizeUp Is Personalizing Small Business Analytics

ORATS Cleans Up Options Data So You Don't Have To