Netflix Analysts Have Wide-Ranging Reactions To Q1 Report

The analysts covering Netflix Inc. (NASDAQ; NFLX) stock this week are much like a big family trying to figure out what to watch on the streaming service. Some are leaning strongly Bull (Durham) and a few are vociferously arguing for (Paddington) Bear.

In between, there's some romance for the darling of the streaming industry — and drama and mystery about how much of its content may be going away and whether price hikes will make customers do the same. 

Netflix reported a first-quarter earnings beat Tuesday at 76 cents per share, ahead of the Street by 19 cents. Revenue beat estimates by $21 million. But its stock price fell on weak guidance, with a lower second-quarter sales estimate than expected.

The Analysts

• Morgan Stanley analyst Benjamin Swinburne reiterated an Overweight rating on Netflix with a $450 target price.
• KeyBanc Capital Market’s Andy Hargreaves maintained a Sector Weight rating.
• Wedbush analyst Michael Pachter maintained an Underperform rating with a price target increase from $165 to $183.
• Raymond James analyst Justin Patterson reiterated a Strong Buy and $470 price target.
• Buckingham Research Analyst Matthew Harrigan maintained a Neutral rating and lowered the price target from $382 to $358.
• Oppenheimer’s Jason Helfstein maintained an Outperform rating and lowered the price target from $425 to $410.
• Guggenheim’s Michael Morris maintained a Buy rating with a $420 price target.
• Tigress Financial's Ivan Feinseth said in his daily newsletter that Netflix could go as low as $250.

The Theses

The (Raging) Bulls in the bunch include Guggenheim's Morris, who pointed to stronger-than-expected subscriber growth, the potential for a growing interest in programs from other countries and room for global growth.

Another strong bull on Netflix, Raymond James' Patterson, said that even after price increases, gross new subscribers didn't change. Patterson said trends that matter include record paid net subscriber adds in 2019; pricing power; operating margin expansion; and improving free cash flow trajectory.

The (Berenstain) Bears include Wedbush's Pachter, whose price target on the stock is more than $280 lower than the highest target. Netflix has a cash burn problem, he said — and content migration and price decisions could slow subscriber growth. 

"Netflix is about to lose a significant portion of its most popular content, and this content migration is happening on the heels of a relatively large price increase," the analyst said. "We believe that Netflix’s valuation is unwarranted."

Feinseth also warned about spending at Netflix.

"Netflix will spend over $8 billion on original content this year, which is a significant portion of its approximate $20 billion a year in revenue," Feinseth wrote. "I have been warning against this increase in risk for some time and believe Netflix will see a significant drop-off in growth and may have to start to reduce its monthly subscription price to maintain its customer base." 

Price Action

Netflix shares were down 1.02 percent at $355.79 at the time of publication Wednesday. 

Related Links

Netflix Analysts Preview Q1 Print

Netflix Falls On Lower Earnings, Sales Guidance