Analysts surveyed by FactSet predict that Netflix (NFLX.O) will have second-quarter revenue of more than $9.5 billion and earnings per share will jump to $4.74.
Netflix reported second-quarter earnings after the market closed on Thursday, and judging by its stock price, it has a lot of catching up to do.
The streaming company’s shares, which recently traded at $648, have risen by a third this year. That’s double the 17% gain in the S&P 500.
But even with Wall Street trading at more than 35 times consensus estimates for this year’s earnings, buy ratings on the stock still outnumber hold ratings by a 2-to-1 ratio.
“Netflix has successfully established a nearly insurmountable lead in the streaming wars,” Wedbush analyst Alicia Reese wrote last week as she reiterated her “outperform” rating on the stock. “We expect competitors to continue to struggle as they try to replicate Netflix’s business model.”
Reese noted that Netflix will eventually move from a high-growth, low-margin business to a slower-growth, higher-margin business, but she and other analysts expect no slower growth in the June report.
Analysts surveyed by FactSet expect second-quarter revenue to exceed $9.5 billion, up 16% year-over-year, and earnings to jump 44% to $4.74 per share.
Netflix shares slipped in April when the company said it would stop counting subscribers on a quarterly basis in 2025. Some investors interpreted that as a sign that subscriber growth was coming to an end. The subsequent recovery in shares suggests those concerns have dissipated.
But that doesn't mean membership trends won't be reviewed during the June earnings report. The sell-side consensus expects Netflix to add about 4.5 million net subscribers this quarter, mostly internationally, bringing the total to 274.5 million.
Of course, what matters more is the expectations of buy-side fund managers and individuals. A buy-side survey by Guggenheim Securities reported on Wednesday showed that fund managers expected even higher, with net additions of more than 8 million users this quarter.
Other things to watch include how the streamer's new ad-supported tier performs. Wedbush's Reese believes Netflix is close to the point where the ad tier will start to contribute to revenue and earnings growth. That should help boost operating margins from the robust 26.4% she forecast in June to closer to 30% in the next few years. "We believe Netflix will continue to expand profitability and generate more free cash flow to support our forecast," Reese said.
The article is forwarded from: Jinshi Data
