The bullish case for Netflix, Inc. NFLX remains unchanged, but SunTrust's first-hand checks into subscriber trends warrants a price target revision.
The Analyst
SunTrust Robinson Humphrey's Matthew Thornton maintains a Buy rating on Netflix with a price target lowered from $410 to $355.
The Thesis
SunTrust's proprietary Netflix subscriber tracker data through November suggests the company's domestic total subscriber net adds for the fourth quarter are likely to come in at 1.43 million to 1.75 million, Thornton said in a note. This would fall short of the consensus estimate of 1.75 million to 1.8 million net adds although December's data could close the gap.
Even with the addition of compelling original new content like "Bird Box" and Taylor Swift's "Reputation," December's net adds are unlikely to be meaningful enough for Netflix to report a subscriber beat in its fourth quarter report, the analyst said.
On the positive front, reports of the company looking to name Activision Blizzard, Inc. ATVI CFO Spencer Neumann as its new CFO would be viewed favorably given his experience at a public and global consumer tech and entertainment company with similar balance sheet leverage and subscription venue profiles.
SunTrust's revised $355 price target for the end of 2019 is based on new developments, including the revision in subscriber estimates, the recent debt raise, lower comp multiples and higher rates.
Price Action
Netflix was trading lower by 3 percent Wednesday at $259.51 per share.
Related Links:
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