Netflix's Q2 Earnings Could Impress: Analyst Predicts 30% Profit Growth From Ads, Price Hikes

As streaming giant Netflix Inc. NFLX gears up for its second-quarter earnings on Thursday, MoffettNathanson analyst Robert Fishman says investors should look forward to a strong performance, led by price hikes and early momentum in the platform’s advertising business.

Check out the current price of NFLX stock here.

What Happened: On Wednesday, Fishman said that he was “Expecting mid-teens revenue growth” during its second quarter, while speaking to CNBC’s Closing Bell Overtime, while pointing to pricing increases and the ramp-up of ad monetization as the two primary catalysts driving bottom-line gains.

“The result of these pricing increases and the early innings ramp up in the advertising monetization of their engagement really allows a lot of these revenue dollars to flow down to the bottom line,” he added. “So we're expecting 30% earnings growth this year.”

See Also: Netflix’s Squid Game Reality Show Gets Season 2 Date: $4.56 Million Prize Without The Killing

Fishman believes that growth won't be a one-off either. He sees “that elevated level of earnings growth to really continue over the next few years,” which in turn “allows for this premium multiple” that the stock currently commands.

The analyst also emphasized the company's decision to move away from its exclusive relationship with Microsoft in advertising. That shift is allowing Netflix to partner with third-party platforms like The Trade Desk and invest in in-house technology to better monetize its massive viewer engagement.

“By building out their in-house technology and partnering with third-party demand-side platforms like the Trade Desk, really has allowed them to start to monetize their inventory in a completely different way,” Fishman said.

Looking ahead, Fishman is optimistic that Netflix can further expand through live events and sports, pointing to recent moves like its women's boxing match stream. “They have the ability to really tap into a different level of engagement,” he said.

Why It Matters: Netflix shares are up 41% year-to-date and 153% over the past five years, with a market capitalization of $532 billion.

According to reports, it aims to double this figure to $1 trillion by 2030, while tripling its operating income from $10 billion in 2024, and growing its global subscriber base to 410 million, from the existing 300 million. It is particularly focused on international markets with high broadband penetration, such as India and Brazil, to attain this goal.

In the lead up to its second quarter results, analysts are citing a weak dollar and strong performances by hit series Squid Game to drive momentum.

The company is set to release its second-quarter results on Thursday at 12:45 PM EST.

Price Action: The stock was down 0.79% on Wednesday, trading at $1,250.31, and is up 0.36% after hours.

According to Benzinga’s Edge Stock Rankings, Netflix scores well on Momentum, Growth and Quality, while having a favorable price trend in the short, medium and long terms. Click here for deeper insights into the stock, its peers and competitors.

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Photo courtesy: marekfromrzeszow / Shutterstock.com

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