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Binging On Netflix, Sell-Side Style: Analysts Review Company's Q3 Earnings

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Binging On Netflix, Sell-Side Style: Analysts Review Company's Q3 Earnings
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Netflix, Inc. (NASDAQ: NFLX) shares are surprisingly flat on Tuesday morning after the company reported its third-quarter earnings Monday afternoon. The market can’t seem to decide what to make of Netflix’s numbers. Here’s what six Wall Street analysts had to say.

Voices From The Street

1. Baird: Analyst William Power said rising content costs are partially offsetting momentum from rising subscriber count. “We remain constructive on the subscriber momentum, but also believe much is already priced in, particularly with ramping content costs and competition,” Power wrote.

2. Stifel: Analyst Scott Devitt said investors should keep an eye on costs as Netflix ramps its content spend from $7 billion to $8 billion in 2018. “Despite these investments, we anticipate Netflix to deliver ~400bps of operating leverage next year as we expect subscriber growth / pricing increases to more than offset growth in content and marketing expenses,” Devitt wrote.

3. Rosenblatt Securities: Analyst Alan Gould said Netflix’s international performance was particularly impressive in Q3. “The international revenue guidance is over $100 million higher than we had anticipated,” Gould wrote.

4. UBS: Analyst Doug Mitchelson said the primary concern for Netflix bulls should be what he calls the four C’s: competition, content, costs and capital. “We continue to believe that Netflix's dramatic lead in scale and execution are underappreciated relative to competition and content concerns, while costs and capital are a function of management investing in success to widen the moat as others begin to address what is still a nascent marketplace when considered globally (even in the U.S., streaming is sub-30% of video consumption; overseas dramatically less),” Mitchelson wrote.

5. Loop Capital Markets: Analyst David Miller said Netflix is positioned to be free cash flow positive by fiscal 2019. “We're happy with NFLX's performance thus far in 2017, but continue to believe it's not too late for large-cap growth PMs to take new positions in what remains one of the only true largecap growth stories in Media,” Miller wrote.

6. The Buckingham Research Group: Analyst Matthew Harrigan said even with new competition on the way from Walt Disney Co (NYSE: DIS) and others, Netflix will continue to widen its global advantage over competitors in 2019. “The most important Netflix growth vector is membership activity overseas, including in Asia where there are more cultural differences to address than in more Netflix established Latin America and Europe,” Harrigan wrote.

Ratings And Price Targets

Wall Street is mostly bullish on the Netflix story. However, with the stock up more than 2,000 percent in the past five years, some analysts are more bullish than others.

  • Baird has a Neutral rating and $190 target.
  • Stifel has a Buy rating and $235 target.
  • Rosenblatt has a Buy rating and $225 target.
  • UBS has a Buy rating and $237 target.
  • Loop Capital Markets has a Buy rating and $242 target.
  • Buckingham has a Buy rating and $235 target.

Related Link: Short Sellers Pour Into FAANG Stocks

Latest Ratings for NFLX

DateFirmActionFromTo
Nov 2018BuckinghamUpgradesUnderperformBuy
Oct 2018Raymond JamesMaintainsOutperformOutperform
Oct 2018Imperial CapitalMaintainsOutperformOutperform

View More Analyst Ratings for NFLX
View the Latest Analyst Ratings

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