SunTrust Continues To See Upside Potential In Netflix's Q3

The bullish case for streaming video platform Netflix, Inc. NFLX remains unchanged after the latest round of monthly data showed encouraging subscriber growth trends, according to SunTrust Robinson Humphrey.

The Analyst

Analyst Matthew Thornton maintained a Buy rating on Netflix with an unchanged $410 price target.

The Thesis

SunTrust's proprietary "Search Tracker" data from the first two months of the third quarter supports the following assumptions for the third and fourth quarters, Thorton said:

Domestic Q3 subscriber adds of 0.72 million versus the consensus estimate of 0.67 million and management's guidance of 0.65 million.
International Q3 subscriber adds of at least 5.03 million versus a consensus estimate of 4.44 million and management's guidance of 4.35 million.
Search interest for originals released in the third quarter are up year-over-year.
The consensus estimate for fourth-quarter domestic subscriber adds of 1.63 million is "reasonable but not a low hurdle."
The consensus estimate for fourth-quarter international subscriber adds of 6.14 million is "reasonable."

Netflix's second quarter subscriber miss could be attributed to the underperformance of "13 Reasons Why" and competition from the World Cup, the analyst said. Looking forward, the latest round of subscriber data makes it clear subscriber trends not only rebounded but could come in ahead of expectations.