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What Analysts Think About Netflix After a Disastrous Earnings Report

Netflix Inc. (NASDAQ: NFLX) released its second-quarter 2016 earnings report after markets closed Monday. This was by far one of the most disappointing earnings reports that we have seen so far in this season, and the worst part was that the earnings were more or less in line. But the earnings were not the biggest problem in the report.

We have put together a look what analysts are saying after this earnings report, to get a clearer picture on where this stock is going. 24/7 Wall St. also has included some of the highlights from the earnings report.

This online streaming giant said that it had earnings per share (EPS) of $0.09 on revenues of $1.97 billion, which compared to Thomson Reuters consensus estimates of $0.02 EPS and $2.11 billion in revenues. In the same period a year ago, the company reported EPS of $0.06 on revenues of $1.48 billion.

Netflix puts its U.S. streaming subscriber numbers at 46 million, while International streaming subscriber numbers grew by 1.99 million to 33.89 million. Total subscribers now number 83.2 million, up by more than 1.5 million sequentially and about 17.6 million from the same period last year.

Sequential U.S. subscription additions of 290,000 were far below a consensus analysts’ estimate of 532,000. International additions were expected to rise by 2 million sequentially. Analysts and investors still consider subscriber additions to be the company’s most important metric. The consensus estimates, by the way, were the same as the company guided when it reported first-quarter results.

For the third quarter of 2016, Netflix expects to add just 400,000 new paid subscribers in the United States and 2.1 million internationally. Margins in the United States are expected to rise 0.8% in the third quarter and, internationally the company expects the second quarter’s net loss of $69 million to widen to $95 million.

Netflix continues to believe that it can attract 60 million to 90 million U.S. streaming subscribers and that it can “run around break-even on a net income basis in 2016” and turn a “material” profit in 2017 and beyond. To achieve that, the company said, it plans to reduce international losses and grow U.S. profits. A worthy goal, but perhaps not easy to achieve with continuing competition for entertainment dollars and eyeballs in the United States.

Quite a few analysts weighed in on Netflix after the earnings were released:

  • BTIG has a Buy rating and lowered its price target to $130 from $150.
  • Baird has a Neutral rating and lowered its price target to $94 from $108.
  • BMO has a Market Perform rating and lowered its price target to $85 from $115.
  • Canaccord Genuity has a Buy rating and lowered its price target from $120 to $115.
  • Citigroup has a Neutral rating and lowered its price target to $92 from $106.
  • Cowen has an Outperform rating and lowered its price target to $110 from $130.
  • Credit Suisse raised its price target to $122 from $119.
  • FBR has a Market Perform rating with a $104 price target
  • Goldman Sachs reiterated a Buy rating but lowered its target from $120 to $115.
  • Jefferies has an Underperform rating and lowered its price target to $76 from $80.
  • JPMorgan has an Underweight rating and lowered its target price to $116 from $125.
  • Mizuho has a Neutral rating and lowered its price target to $90 from $109.
  • Morgan Stanley reiterated an Overweight rating and lowered its price target from $125 to $110.
  • Nomura has a Buy rating and lowered its price target to $110 from $115.
  • Oppenheimer lowered its price target to $114 from $123.
  • Pacific Crest reiterated an Overweight rating and lowered its target from $130 to $125.
  • Raymond James lowered its price target to $120 from $130.
  • RBC lowered its price target from $140 to $130.
  • Sanford Bernstein reiterated an Underperform rating with a $62 price target.
  • SunTrust Robinson has a Neutral rating and lowered its target to $100 from $110.
  • UBS downgraded it to Neutral from Buy and lowered its price target to $92.
  • Wedbush has an Underperform rating and raised its price target to $50 from $45.

Shares of Netflix closed trading at $85.89 on Friday. The stock has a consensus analyst price target of $106.08 and a 52-week trading range of $79.95 to $122.27.