Netflix Analyst Braces For Big Q1 Beat As Pandemic Accelerates Migration To Streaming Services

Netflix Inc NFLX is scheduled to report fiscal-year 2020 first-quarter results Tuesday after the close. An analyst at Goldman Sachs is upbeat concerning the quarterly performance.

The Netflix Analyst

In a note out April 16, Heath Terry reiterated a Buy rating on Netflix and hiked the price target from $430 to $490.

The Netflix Thesis

Netflix is likely to report first-quarter results well above guidance, with net subscriber adds expected at 10.3 million, Terry said in a note. The break-up of the paid net adds being 1.6 million in U.S. and Canada, 4.5 million in EMEA, 1.7 million in LatAm and 2.5 million in APAC.

The company had guided to paid net adds of 7 million.

The upbeat expectation, according to the analyst, is premised on the strength of content additions in the quarter and the most recent app download data.

Content additions to the platform along with the value of Netflix's library to those staying home during the COVID-19 crisis more than offset the lingering impact of last year's price increase and growing competition in SVOD, according to the analyst.

"More importantly, we believe the COVID-19 crisis is accelerating the shift from traditional content viewership (linear TV, theaters, etc) to streaming services, as the network effect of these additions, the sheer scale of Netflix's content library, and its growing distribution ecosystem serve to bend the curve of Netflix's subscriber growth higher both in the immediate and long term," Terry wrote in the note.

Goldman expects second-quarter paid net adds of 8 million, well above the 4.4 million consensus estimate, although it cautioned of the company issuing conservative guidance due to the uncertainty around the duration of COVID-19.

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