The Key Viewer Metric This Netflix Analyst Likes Heading Into Q2 Earnings

Netflix, Inc. NFLX is expected to see a surprise upside in the second quarter after benefits from 2020 subscriber growth “pull-forward” persist, according to Morgan Stanley.

The Netflix Analyst: Benjamin Swinburne reiterated an Overweight rating on the stock and hiked the price target from $485 to $575.

The Netflix Thesis: Beyond subscriber growth, Swinburne said Netflix has structural benefits from greater scale and all the operational/financial benefits that brings, an acceleration in engagement growth, and pressure on its primary competition for audience time.

Netflix is redefining scale in television as it approaches 200 million members this year.

“The benefits of this scale are numerous, including everything from an ability to attract the top talent, leverage the broadest set of consumer data, capture marketing and financing efficiencies, and more,” the analyst wrote in Wednesday's note.

On the other hand, among 18-49 viewers, TV viewing declines are accelerating during the pandemic and total day ratings on TV are better than prime time. This means Netflix is “likely to be less impacted by re-opening,” said Swinburne.

Swinburne assumed a $775 bull-case valuation and raised NFLX global subscriber base to 325 million.

NFLX Price Action: NFLX shares trading down around $515.93 at the time of publication. The company reports earnings after Thursday's closing bell; Analysts expect earnings of $1.81 per share on sales of $6.08 billion.