Netflix Analysts Positive On 2021 Lineup, Pricing Power Despite Subscriber Miss

Netflix shares fell after the streaming company reported lower-than-expected subscriber growth and earnings per share Tuesday. 

Netflix Analysts On Subscriber Growth: Netflix Inc NFLX reported 2.2 million net subscriber adds in the third quarter against guidance of 2.5 million additions. 

“Despite the slight miss in sub adds Netflix struck a more bullish tone on the call disclosing an additional 300k subs in the 48 hours after the quarter ended suggesting strong momentum to start 4Q,” BofA Securities analyst Nat Schindler said in a note. 

Raymond James analyst Andrew Marok said the “underlying trends in business remain solid.”

The analyst maintains a Market Perform on Netflix and said shares are appropriately valued at 8x 2021 estimated revenue.

Needham's Laura Martin said the commentary from Netflix could translate into the company reporting negative subscriber adds in 2021.

Related Link: Jim Cramer Thinks Buyers Will Come Back To Netflix Stock

Netflix Analysts On Pricing: BofA's Schindler said Netflix can continue to increase its market share from linear TV.

Netflix will continue price increases, with a hike in the U.S. in 2021 likely, the analyst said. 

Needham's Martin said Netflix should add an additional pricing tier to compete with Walt Disney Company DIS, Apple Inc AAPL, Hulu, ViacomCBS VIAC and Comcast Corporation CMCSA.

All of these companies have a $5-$7/month or free plan available for consumers, the analyst said. 

Netflix could do this by placing ads on the lower-priced tier, she said.

Placing advertising on international plans could help boost international ARPU, which is 30% below ARPU in the U.S., Martin said. 

Netflix's Free Cash Flow A Positive: One of the highlights in the third quarter for analysts was Netflix’s free cash flow.

“For the second consecutive quarter FCF was the bright spot of results,” Rosenblatt analyst Bernie McTernan said in a note.

The company is in the “early days in migrating from a growth story,” and the free cash flow could help with Netflix's valuation going forward, the analyst said. 

Morgan Stanley analyst Benjamin Swinburne raised the price target on Netflix from $630 to $640, citing the improved FCF outlook.

A lower marketing spend and the self-producing of shows has helped margins and free cash flow, the analyst said. 

Netflix's Exciting 2021 Lineup: Netflix is ahead of television and film in the resumption of production, and this is a positive going forward, Swinburne said. 

“The shuttering of theaters and the lack of tentpole Hollywood fare in the near to medium term and Netflix’s content advantage should be substantial in 2021,” the Morgan Stanley analyst said. 

Needham's Martin is cautious on 2021 and said the resumption of live sports, the opening of movie theatres and content resuming elsewhere could hurt Netflix's upside. 

KeyBanc's Justin Patterson said Netflix highlighted its 2021 lineup on the conference call.

The return of “Stranger Things” and “The Witcher” are seen as positives for 2021, along with a movie starring The Rock, the analyst said. 

NFLX Price Action: Netflix shares were trading down 6.88% at $489.29 at last check Wednesday. 

Photo courtesy of Netflix.