NetflixNASDAQ:NFLXThe company will release its financial results for the second quarter on July 19th, 2023. The company’s recent initiatives, including the crackdown on password sharing and the launch of ad-supported plans, will likely drive Q2 financials and the paid membership base.
While its efforts to monetize its platform efficiently augur well for growth, analysts’ average price target ahead of the Q2 print indicates that positives are already reflected in the stock price. NFLX has, for instance, risen a great deal (about 53% in the last year and 138% within a year), suggesting that its potential upside could be limited. Our Website Traffic tool also shows a sequential decline. Let’s dig deeper.
Netflix – Q2 Expectations
Wall Street expects Netflix to report revenue of $8.28 billion in Q2, which compares favorably to the prior-year quarter’s revenue of $7.97 billion. Moreover, it is higher than the company’s guidance of $8.2 billion and shows a slight sequential improvement.
On the bottom line front, analysts expect NFLX to post earnings of $2.85 per share, reflecting a decline on a year-over-year and sequential basis. The company’s EPS is expected to benefit from the crackdown on password sharing and the new ad plan, which is generating higher average revenue per member in the U.S. (subscription + ads) compared to the standard plan.
However, the price drop in several countries in order to increase adoption over the long run could harm near-term profitability. Furthermore, difficult year-over-year comparisions could continue to be a drag.
Mixed growth in website traffic
Netflix’s solid content slate consistently drives engagement, which is crucial for customer retention and growth. TipRanks’ website traffic screener shows that traffic declined for NFLX on a sequential basis but increased from the year-ago quarter.
Per the tool, the number of visits to netflix.com was down 6.9% quarter-over-quarter in Q2. In Q2, however, the website traffic increased by 36.05% compared to last year. Find out how website traffic can help you to research your favorite stocks.
Netflix: Buy or Sell?
Wall Street analysts consider Netflix to be a leader in the streaming market. Further, they expect NFLX to remain shielded from the SAG–AFTRA (Screen Actors Guild – American Federation of Television and Radio Artists) strike due to its solid content pipeline. The analysts are cautiously hopeful due to its significant stock growth.
Heading into the earnings, Loop Capital analyst Alan Gould increased NFLX’s price target to $425 from $330 on July 17. Analyst Alan Gould reiterated that he recommends a Hold rating, despite the recent surge in NFLX’s share price.
The contrary, Deutsche Bank’s Bryan Kraft maintained his Buy recommendation for NFLX on July 17. The firm also raised Netflix’s price target to $475 from $410. The analyst lauded the company’s solid revenue, earnings, and free cash flow growth capabilities.
TipRanks has rated NFLX as a Moderately-Buy stock, with 19 Buys, 14 Holds and 2 Sells. Moreover, due to the recent appreciation in stock price, analysts’ average price target of $424.63 implies 5.65% downside potential.
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