Netflix Analyst Remains Bullish Ahead Of Q1 Print, But Expects Near-Term 'Noise'

The long-term bullish case for Netflix, Inc. NFLX remains unchanged, but investors should expect near-term "noise," according to Raymond James.

The Analyst

Analyst Justin Patterson maintains a Strong Buy rating on Netflix with an unchanged $470 price target.

The Thesis

Netflix is scheduled to report first-quarter results Tuesday, April 16, and certain data sets point to strong domestic and international performance, Patterson said in a Thursday note.

As of the end of March, Netflix held the top-ranked iOS Entertainment app spot in 61 countries and was ranked in the top five in 123 countries, the analyst said. Google Trends data increased 10 percent year-over-year worldwide and 9 percent in the U.S., he said. 

Netflix's second-quarter guidance could disappoint ahead of the new "Game of Thrones" season and competition from "Avengers," Patterson said.

Netflix also has a lighter content slate, foreign exchange volatility and the phasing in of price increases, which could result in a more conservative tone from management, he said. 

Regardless of any near-term challenges, Raymond James' long-term Netflix thesis remains unchanged and is based on the following: 

• A sustainable mid-20-percent revenue growth rate over the medium-term.
• Operating margin expansion due to a growing scale and moderating investments.
• Improving free cash flow trends.

Price Action

Netflix shares were down 0.56 percent at $365.81 at the time of publication Friday. 

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