Netflix Near All-Time High After COVID-19 Shutdowns

Netflix (NFLX) posted strong Q1 2020 results in April, meeting aggressive revenue guidance at $5.75 billion. The company added 15.77 million subscribers, more than double the consensus, but the streaming giant missed the $1.57 EPS estimate. Analysts may have miscalculated the impact of stay-at-home and quarantine orders, triggering the shortfall. Upside guidance for Q2 expects the the company to earn $1.81 EPS and $6.05 billion in revenues. Spokesmen haven’t discussed recent performance but Q2 2020 earnings are scheduled for July 21 release.

Wall Street Bullish Consensus

Wall Street rushed to upgrade Netflix when the pandemic hit the USA in the first quarter,  realizing that subscriber growth would escalate due to shutdowns. It’s now rated a ‘Moderate Buy’ at TipRanks, based upon estimates from 35 analysts covering the stock. 24 ‘Buy’, 7 ‘Hold’, and just 4 ‘Sell’ recommendations support the bullish consensus rating, despite the lofty 84.61 price-to-earnings ratio (P/E). Updated price targets range from $198 to $580 and the stock is now trading nearly 50 points below the mid-range target of $465.

The bullish performance has generated enthusiastic analyst commentary this June, with JP Morgan analyst Doug Anmuth maintaining an overweight rating. He reiterated a $535 price target while noting that “daily average user (DAU) growth remains elevated from pre-COVID-19 levels and has been stable for about 6 weeks at 20% year-over-year, suggesting strong engagement”. He also highlighted Southeast Asian growth after successful launches in the Philippines, Thailand, Indonesia, and Malaysia.

Mixed Netflix Outlook

The technical chart has generally tracked bullish commentary so far in 2020. Netflix broke out above 2018 resistance at $423 in April but has struggled to gain ground since that time, wobbling back and forth across the breakout price. This price action denotes high levels of uncertainty, with post-outbreak normalcy favoring bears while fears about a dreaded ‘second wave’ reinforce the bullish argument.

Netflix growth could be hampered by a highly-competitive landscape after the current crisis. New services from Walt Disney (DIS), Apple (AAPL),  and Comcast (CMCSA) could take market share and stretch subscriber budgets. The ‘steaming wars” became a hot topic in 2019 before the November Disney+ release but has receded during the pandemic. It’s certain to make headlines once again if Netflix’s July earnings fail to meet estimates.