NetFlix Could Scale to Fresh Record High on Upbeat Q3 Earnings

The California-based global internet entertainment service company NetFlix is expected to report its third-quarter earnings of $2.55 per share, which represents year-over-year growth of over 45% from $1.74 per share seen in the same period a year ago.

The streaming video pioneer would post revenue growth of over 16% to around $7.5 billion. In the last two years, the company has beaten earnings per share (EPS) estimates just thrice with a surprise of nearly 21%.

NetFlix’s better-than-expected third-quarter earnings results, which will be announced on Tuesday, October 19 after the close of trading, could help the stock hit new all-time highs. The company’s shares surged over 17% so far this year and it hit a record high of $646.84 on October 7. The stock ended 0.64% at $633.80 on Thursday.

We expect it is good to buy now as a 50-day Moving Average, 100-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

“NetFlix (NFLX) stock has emerged from its slump, jumping ~22% in<2 months. Estimates have remained relatively flat and NFLX now trades at 8.5x 2022E Rev, the top of its 3-year range. We expect 3Q net adds of 3.5MM and a 4Q guide of ~7-8MM. Squid Games has demonstrated the impact of a successful international strategy and, if done right, games like Oxenfree could achieve a similar Zeitgest moment. We remain ‘Buy’ rated with a price target of $737, representing 8.5x 2023 JEF Rev,” noted Andrew Uerkwitz, equity analyst at Jefferies.

NetFlix Stock Price Forecast

Thirty-two analysts who offered stock ratings for NetFlix in the last three months forecast the average price in 12 months of $641.23 with a high forecast of $780.00 and a low forecast of $342.00.

The average price target represents a 1.17% change from the last price of $633.80. From those thirty-two analysts, 24 rated “Buy”, five rated “Hold” while three rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $650 with a high of $850 under a bull scenario and $400 under the worst-case scenario. The firm gave an “Overweight” rating on the internet television network’s stock.

“We believe share performance is highly dependent on increasing global membership scale. Proven success in the US and initial international markets provides a roadmap to success in emerging markets, and scale should allow NetFlix (NFLX) to leverage content investments and drive margins,” noted Benjamin Swinburne, equity analyst at Morgan Stanley.

“Higher global broadband penetration should increase the NFLX addressable market, driving member growth and providing further opportunity given NFLX’s global presence. Longer-term, we see the ability to drive ARPU growth, particularly given increased original programming traction.”

Several other analysts have also updated their stock outlook. Truist Securities raised the price target to $690 from $600. Jefferies lifted the target price to $737 from $620. Credit Suisse upped the target price to $740 from $643. Guggenheim increased the target price to $685 from $600.

Analyst Comments

“We expect paid net adds of 3.63MM, slightly above the 3.50MM guide, as NetFlix (NFLX) begins to ramp content into the fall. Our proprietary recurring U.S. survey suggests NFLX continues to lead living room TV, as 28% of respondents said NFLX has the best video content, well ahead of other streaming and linear services. Maintain Outperform & $650 Price Target,” noted John Blackledge, Equity Analyst at Cowen.

“We forecast 12% annual revenue growth ’21-’31 driven by 7% domestic growth and 14% international growth. We also forecast 18% annual EBITDA growth, given our view of operating leverage in the business.”

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