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What Analysts Are Saying About Netflix After Earnings

Chris Lange

Published: January 23, 2018 2:05 pm

Last Updated: January 12, 2020 4:12 am

After Netflix Inc. (NASDAQ: NFLX) reported fourth-quarter financial results late on Monday, investors cheered the stock again to all-time highs. Analysts also took this opportunity to hike their price targets.

24/7 Wall St. has included some highlights from the earnings report, as well as a montage of what analysts have said after the fact.

The company posted $0.41 in earnings per share (EPS) and $3.29 billion in revenue, compared with consensus estimates from Thomson Reuters that called for $0.41 in EPS on revenue of $3.28 billion. In the same period of last year, Netflix said it had EPS of $0.15 and $2.48 billion in revenue.

During the quarter, Netflix registered global net adds of 8.3 million, the highest quarter in its history and up 18% compared to last year’s record 7.05 million net adds. This exceeded the 6.3 million forecast, due primarily to stronger than expected subscriber acquisitions fueled by its original content slate and the ongoing global adoption of internet entertainment.

In the United States, memberships rose by 2.0 million, versus the forecast of 1.25 million. Average selling price (ASP) rose 5% in this time as well.

Internationally, Netflix added 6.36 million memberships, compared with guidance of 5.05 million, a new record for quarterly net adds for this segment. Excluding a foreign exchange impact of +$43 million, international revenue and ASP grew 59% and 12% year over year, respectively.

In terms of guidance, the company expects to see global net adds of 6.35 million in the first quarter, compared to 5.0 million last year. This is comprised of 1.45 million in the United States and 4.90 million internationally.

Merrill Lynch reiterated a Buy rating and raised its price objective to $300. The brokerage firm said in its report:

Netflix reports strong upside of 8.3mn net new subs in 4Q vs. consensus estimates of 6.4mn- price increases not causing much churn. Key positives include strong 1Q18 guidance & domestic sub growth reaccelerating, while increased spend remains key risk. We are raising our PO to $300 as we expect Netflix to reach 310mn global subs sooner than expected.

CFRA (S&P) reiterated a Buy rating and detailed in its report:

We raise our 12-month target price by $35 to $270, on premium ’18 price-to-sales of 7.8X, with a sizable upside to long-term growth. We raise ’18’s EPS estimate by $0.17 to $2.38 and set ’19’s at $3.82. Q4 EPS of $0.41 vs. $0.15 matched consensus. Revenues rose 33%, with global subscriber additions of 8.33M (international and U.S. up 6.36M and 1.98M), beating guidance by 2M for an all-time quarterly record. With more U.S. traction and key international momentum, NFLX sees Q1 net adds of 6.35M and ’18 EBIT margins of 10% (300 basis point expansion after ratcheted content spend).

Aegis Capital maintained Hold rating and $230 price target. The firm said in its report:

We increased our 1Q18 and 2018 subscriber estimates, while our full year revenue and operating income increased. The continued wrinkle in this model is the cash burn. Management guided 2018 FCF of negative $3B-$4B vs our prior estimate of -$2B and the reported -$2B in 2017. The cash burn, longer-term competitive pressures, and content costs inflation, keeps us on the sidelines.

Perhaps the only bear on Netflix, Wedbush maintained an Underperform rating and raised its price target to $110 from $93. The firm detailed:

We expect Netflix to burn cash to fund content acquisition for many years, notwithstanding the fact that it has increased price three times while cash burn continues to grow. International profits may remain elusive due to competition for content and subs, and the price increases could cause a deceleration in subscriber growth. Negative FCF makes DCF valuation impossible.

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A few other analysts weighed in on Netflix right after earnings were released:

• Oppenheimer has a Buy rating with a $285 price target.
• Atlantic Securities has a Buy rating with a $303 price target.
• Wells Fargo has a Buy rating and a $285 price target.
• Macquarie has a Buy rating with a $275 price target.
• Morgan Stanley has a Buy rating with a $275 target price.
• Piper Jaffray has an Overweight rating with a $281 target.
• Cannaccord Genuity has a Buy rating with a $280 target.
• Jefferies has a Neutral rating and a $236 price target.
• Sanford Bernstein has a Buy rating with a $302 price target.
• Monness Crespi & Hardt has a Buy rating with a $300 target.
• William Blair has an Outperform rating.
• Buckingham Research downgraded it to Neutral from Buy.
• Stifel has a Buy rating with a $283 price target.
• JPMorgan has a Buy rating and a $285 price target.
• Credit Suisse has a Neutral rating with a $266 price target.
• Barclays has a Buy rating with a $285 target price.

Shares of Netflix traded up 9.5% at $249.16 on Tuesday, in a 52-week range of $137.03 to $257.71. The stock currently has a consensus analyst price target of $222.73, though this has yet to accommodate all the price hikes.