Is Netflix’s Biggest Bear Changing Its Tune?

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Netflix Inc. (NASDAQ: NFLX) is set to release its third-quarter financial results after the markets close on Tuesday. While most analysts are fairly positive on the online streamer ahead of results, the biggest bear may be changing its tune, even if its price target stays low. And considering Netflix is down 15% in the past quarter, Wedbush may be on to something.

Thomson Reuters consensus estimates are calling for $0.68 in earnings per share (EPS) and $4.0 billion in revenue. The same period of last year reportedly had EPS of $0.29 on $2.98 billion in revenue.

Wedbush is not far off in its estimates calling for $0.68 in EPS and $3.988 billion in revenue, as well as domestic and international streaming subscriber net additions of 0.65 million and 4.35 million. Although the estimates are fairly in line with most other analysts on the street, Wedbush has an Underperform rating with a $125 price target.

The brokerage firm detailed its position in the report:

This year’s May-to-June Originals were light compared to last year’s, which in our view was the primary driver for Q2’s total subscriber miss (5.15 million global net adds vs. guidance of 6.20 million). The content comparison for Q3 appears more favorable, and we expect lower quarterly churn to result in net additions that come in modestly above management guidance of 5.00 million global net adds (vs. Q3:17’s 5.30 million global net adds). At a minimum, we expect Q3 net upside of 0.1 million domestic and 0.2 million international subscribers, which would reflect sequential growth from Q2’s 0.67 million and 4.47 million.

The quality of new shows coming into play this year as well as a ramp in international marketing could result in global net subscriber additions above last year’s levels, according to Wedbush. If the firm is right, it expects shares to rally off recent lows.

Shares of Netflix were last seen down about 3% at $329.22 on Monday, with a consensus analyst price target of $380.83 and a 52-week trading range of $178.38 to $423.21.