Wall Street Previews Netflix's Q4 Earnings: Rising Subscriber Numbers Drive Bullish Projections

Netflix, Inc. NFLX added more than 5 million users during the third quarter, which was stronger than expected and has investors hopeful the momentum carried over into the fourth quarter. Here's a preview of what two notable Wall Street analysts are saying ahead of Netflix's Jan. 22 earnings report.

The Analysts

Loop Capital Markets' David Miller maintains a Buy rating on Netflix's stock with a price target boosted from $241 to $252.

The Buckingham Research Group's Matthew Harrigan maintains a Buy rating on Netflix's stock with a price target boosted from $235 to $251.

Loop: Not Too Late To Buy

Netflix is projected to earn 44 cents per share in core EPS in the fourth quarter on revenue of $3.28 billion and report EBIT of $249.2 million, Miller said in a research report. The streaming service is also expected to report a net subscriber addition of 6.21 million, with 1.29 million net U.S. additions, implying it ended 2017 with a 23.3-percent subscriber growth rate. The quarter should also show a "measurable rise" in average selling price from the October price increase, Miller said.

Netflix's status as a "best idea for 2018" remains unchanged ahead of the print, Miller said. The fourth quarter and subsequent reports are expected to show a "level of operating leverage more magnified than it has [been] in the past."

Looking forward to just one year from now, Miller said he expects Netflix to show 133.3-percent EBIT growth and 123.9-percent EBITDA growth by the end of 2018, justifying the stock's valuation. 

Buckingham: Incrementally Positive

Buckingham Research Group projects that Netflix will earn 41 cents per share in the fourth quarter on revenue of $3.273 billion, with related operating profit rising 54.8 percent to $238 million, Harrigan said.

Netflix likely added 6.2 million global streaming members, with more than 5 million of those coming from international markets.

Netflix remains an industry best in combing content with technology given its advanced artificial intelligence, ranking and personalization — which is vital for management to better evaluate future content spending, Harrigan said. 

Buckingham also raised its full fiscal 2018 estimates and now expects Netflix to earn $2.49 per share, up from a prior estimate of $2.37 per share. The revision is attributed to U.S. tax legislation, which should lower the company's tax rate from 25 percent to 21 percent, Harrigan said. 

Elsewhere On The Street

Here's a summary of any rating and price change reiterations or changes ahead of Netflix's print.

• KeyBanc's Andy Hargreaves maintains an Overweight rating on Netflix's stock with a price target boosted from $230 to $270.
• Rosenblatt Securities' Alan Gould maintains a Buy rating on Netflix's stock with a price target boosted from $225 to $265.
• Cowen's John Blackledge maintains an Outperform rating on Netflix's stock with a price target boosted from $215 to $240.
• Stifel's Scott Devitt maintains a Buy rating on Netflix's stock with an unchanged $235 price target.
• B Riley FBR's Barton Crockett maintains a Neutral rating on Netflix's stock with an unchanged $211 price target.

Price Action

Shares of Netflix were up 0.06 percent at $220.46 at the close Friday. 

Related Links:

Some Things To Consider Ahead Of Netflix's Q4 Earnings

Wall Street Praises Netflix's Outlook As Price Increases Begin To Take Effect

Photo courtesy of Netflix.