Netflix releases its reports after the market closes on Thursday, marking the beginning of earnings season for Wall Street’s biggest media and technology giants. Analysts expect the streaming giant to report earnings of $4.74 per share on revenue of about $9.53 billion, based on analysts surveyed by LSEG. Last quarter, the corporate earned $5.28 per share on revenue of $9.37 billion and saw a 16% increase in total members. Many analysts expect one other strong report from Netflix as the corporate cracks down on password sharing, increases its promoting tier and rolls out a powerful content offering. Several major firms even raised their price targets ahead of the report. “Looking ahead, the mix of subscriber tailwinds, the potential for broader global price moves and a robust content offering (particularly [returning] “The company’s 2020 earnings per share ($100,000 through 2025) leaves NFLX positively positioned for operating momentum within the quarters ahead,” wrote Goldman Sachs’ Eric Sheridan, who has a neutral rating. The analyst sees upside from subscriber gains, comments on margin expansion and a reacceleration in revenue as key for investors. Morgan Stanley’s Benjamin Swinburne raised his price target to $780 from $700 ahead of the earnings release, saying advertising should support strong revenue numbers and margin expansion. He sees the company as “in a league of its own” with a price target of $950 next year. The adjustment reflects a potential 20% upside from Wednesday’s closing price. “Lots is priced into NFLX shares, but we remain optimistic in regards to the large growth opportunities that also exist,” he wrote. “We are admittedly paying on the NFLX multiple for the track record this management team has built over twenty years by navigating disruption and capitalizing on opportunities. Advertising will turn out to be more vital to fulfill expectations of revenue and margin expansion.” Even more important for investors and Wall Street, the most important thing could be the company’s subscriber numbers as it fights for attention in a competitive streaming environment. The company had previously said it expects a lower number of new subscribers than last quarter (9.3 million) due to seasonality and will no longer announce quarterly additions starting in 2025. Jefferies analyst James Heaney believes that with these programs and a strong content slate, Netflix has a good chance of beating subscriber numbers in the second quarter. He raised his estimate for the quarter to 5.8 million net additions from 4.9 million. JPMorgan’s Doug Anmuth raised his forecast to 6 million net additions in the quarter from 5 million and expects 30 million net additions for the calendar year. The analyst maintains an overweight rating and raised his price target from $650 to $750 earlier this month. As for paid sharing, Morgan Stanley’s Swinburne estimates that Netflix will convert 30% to 40% of the 100 million households that shared passwords in 2022 into subscribers by year-end. “That suggests there’s still room to draw recent members, who should theoretically be easier to draw to the service than households which have never used Netflix before,” he said. “Our forecast for 20-21 million paid net adds in 2025 reflects the view that the advantages of paid sharing will fade more sharply next yr.” Netflix has made progress in the advertising space, announcing in May that it had 40 million active monthly users in that space. However, some analysts see the development at an early stage, with Evercore ISI’s Mark Mahaney noting that demand for advertising will have to “fully meet up with subscriptions.” NFLX YTD mountain of Netflix shares year-to-date. Bank of America does not expect “a big revenue contribution until 2025 – particularly given the flood of latest inventory coming to market (given the launch of several ad-supported services from competitors in recent months) and against the backdrop of a mixed promoting environment,” wrote analyst Jessica Ehrlich. Certainly, some analysts are warning investors to be cautious on the earnings release. These include Citi’s Jason Bazinet and Piper Sandler’s Matt Farrell. Both firms maintained their neutral ratings as the stock has risen 34% year-to-date. “We maintain our neutral stance on the stock as we consider the risk-reward profile is balanced with respect to print,” wrote Farrell. “However, we consider Netflix has proven itself to be a pacesetter within the streaming space.”
