Netflix Analyst Raises Estimates Ahead Of Q2 Subscriber Report, Sees 'Content Advantage' Over HBO Max, Disney+

Netflix Inc NFLX, which added a record net 15.77 million paid subscribers in the first quarter, is poised to comfortably beat its guidance when it reports second-quarter results July 16, according to a Credit Suisse analyst. 

The Netflix Analyst: Douglas Mitchelson maintained an Outperform rating on Netflix and hiked the price target from $465 to $550. 

The Netflix Thesis: Netflix app downloads climbed 42% year-over-year, accelerating from the 30% growth in the first quarter, Mitchelson said in a note. (See his track record here.)

The growth reflected strong underlying trends that have been helped by shelter-in-place, reduced competition from other media avenues, momentum building in Asia, content success and a lack of price increases, the analyst said. 

Credit Suisse now estimates global net adds of 10.55 million, ahead of the company's guidance of 7.5 million.

Second-half comps will be tougher, given the COVID-19 pull forward and the return of sports, he said. 

The 2.55-million-subscriber upward revision to Credit Suisse's second-quarter global net adds estimate is primarily due to the estimated 2-million-subscriber increase in the Asia-Pacific, Mitchelson said.

Netflix's Competition: Netflix has extended its lead against all major streaming platforms this year, the analyst said, citing Nielsen U.S. TV screen viewing data.

"Further, neither HBO Max's U.S. debut nor the strong Disney+ launches made any noticeable impact on NFLX performance," he said. "We believe NFLX's increasing content advantage and the Asia flywheel fully spinning up will bolster confidence in sustainable growth."

Mitchelson sees broad-based strength at Netflix, as growth across almost all markets accelerated in the second quarter.

Despite the positive net adds revision, citing LatAm currency drag, Credit Suisse lowered its second-quarter revenue estimate by $52 million to $6.003 billion, which is below the guidance of $6.048 billion.

Mostly on the basis of Asia strength, the firm increased its net adds estimates for the third quarter to 5.2 million and for the fourth quarter to 7.2 million, taking its 2020 estimate to 38.7 million.

NFLX Price Action: Netflix shares were down 0.13% at $493.16 at the close Tuesday.

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Photo courtesy of Netflix.