Investors and analysts could focus on upcoming content and growth of the ad-supported plan when streaming giant Netflix Inc NFLX reports second-quarter financial results on Thursday, July 18 after market close.
Here are the earnings estimates, what analysts are saying and key items to watch.
Earnings Estimates: Analysts expect Netflix to report second-quarter revenue of $9.53 billion, according to data from Benzinga Pro.
The company reported revenue of $8.19 billion in last year's second quarter. Netflix has beaten analysts' revenue estimates in three of the past five quarters and five of the past 10 quarters.
Analysts expect Netflix to report second-quarter earnings per share of $4.74, compared to $3.29 in last year's second quarter. The company has beaten earnings per share estimates in four of the past five quarters and eight of the past 10 quarters.
Guidance from Netflix calls for second-quarter revenue to be $9.49 billion and earnings per share to be $4.68.
What Analysts Are Saying: Expectations for Netflix could be too high in the second quarter, Rosenblatt analyst Barton Crockett said in a new investor note.
The analyst said the outlook of second-quarter member growth is lower than that of the first quarter, which is reasonable given normal seasonality.
"We don't see a basis for the more bullish calls that Netflix can substantially top its member growth outlook," Crockett said.
The analyst, who had a Neutral rating and $554 price target, said membership growth is the key to Netflix stock reaction to earnings reports.
Crockett said usage data from the company and Google searches show a decline in the second quarter compared to the first quarter. The analyst said the second and third quarters are seasonally the slowest for subscriber growth.
"While Netflix is a well-managed company, the transition from growth to a more mature trajectory could weigh on share performance."
JPMorgan analyst Doug Anmuth also recently said expectations were high for Netflix's second quarter. The analyst, who had an Overweight rating, raised the price target from $650 to $750.
"We remain positive on Netflix shares heading in Q2 earnings on Thursday, 7/18, while also recognizing high expectations," Anmuth said.
The analyst said positive trends for Netflix include paid sharing growth, core subscriber growth, strong content and the ad-supported tier growth. Additionally, sports content could boost engagement for Netflix, the analyst said.
"We expect a bigger push into live sports over time, particularly as leverage continues to shift in NFLX's direction."
The ad-supported plan is the key for Netflix to scale subscribers going forward, Benchmark analyst Matthew Harrigan said.
The analyst, who had a Sell rating, raised the price target from $450 to $545.
"Netflix management undeniably continues to execute well on paid sharing, its AVOD effort and injecting significant new content including NFL Christmas Day games and WWE Raw next year," Harrigan said.
While Harrigan praised the company's growth and operations, valuation of the stock looks stretched.
"We still do not feel the current valuation can be justified even valuing Netflix as a Nasdaq 100 high growth technology name and disregarding its hybrid media stock character."
Here's a look at other analyst ratings on Netflix and their price targets:
Bank of America: Buy rating, raised price target from $700 to $740
Macqaurie: Outperform rating, $685 price target
Guggenheim: Buy rating, raised price target from $700 to $735
Jefferies: Buy rating, raised price target from $655 to $780
Morgan Stanley: Overweight rating, raised price target from $700 to $780
KeyBanc: Overweight rating, raised price target from $707 to $735
TD Cowen: Buy rating, raised price target from $725 to $775
Key Items to Watch: Netflix added 9.33 million paid subscribers in the first quarter to end the quarter with 269.6 million.
The company did not provide guidance for subscribers only saying it expected the second quarter add to be lower than the first quarter. Netflix also said it won't provide subscriber metrics in 2025. The headline subscriber number will likely be a key for investors and analysts.
The upcoming content slate from Netflix will also be another hot topic with a second season of the massive hit "Squid Game" expected in the second half of 2024 with no release date.
Other sports content will also fill the second half of the year like a Mike Tyson vs. Jake Paul boxing match, a Joey Chestnut hot dog eating contest and two NFL games on Christmas Day.
Netflix could share an update on more sports content or how the advertising demand for these key events is shaping up in relation to the ad-supported plan.
The streaming company could also share other upcoming shows and movies to get fans and investors excited.
NFLX Price Action: Netflix shares trade at $642.71 Wednesday at publication versus a 52-week trading range of $344.73 to $697.49. Netflix stock is up 31.8% year-to-date in 2024.
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