Netflix, Inc. will report Q3 earnings on Oct. 14th after the close of the markets. Pacific Crest expects the firm to post the results in-line with guidance, and advises investors to own the stock mainly because it has bright perspective for the long-term.
Netflix to come back strongly in 2016
Analyst Andy Hargreaves expects the firm to add at least 1.15m net local subs in the Q3 and 2.4m globally. These numbers are in-line with the firms own guidance. The global estimates take into account the slowing of adoption rate in existing countries and low adoption in Japan.
For Q4 the consensus estimates are conservative as the US firm is forecasted to add 3.17m global subs, below the firm’s guidance of 3.2m. A lower outlook is based on expected yoy decline in the adoption rates in current markets, and a slow start in Spain, Italy and Portugal..
Netflix, Inc. believes that next year it will likely beat the estimates for global subs growth. Sell-side analysts expect a net addition of 12.1m versus firms own estimate of 15.8m. “Heading into 2016, we believe Netflix is positioned to grow international subscribers above expectations,” analyst said.
October, make or break for investors
Netflix’s stock declined by more than 10% in September, partly due to the number of major digital video moves by rivals Amazon and Hulu. A slowdown in China, which gripped the entire market, also had an impact on the stock.
Despite that, the shares have grown in value by more than 100% in 2015, and the consensus is that the last month drop gives a good buying opportunity in a story that is bullish otherwise. And October will be month deciding how bullish the story be in reality.
For the Q3, Netflix is expected to post a profit of $0.08 a share, down from $0.16 a share last year. It must not come as a surprise as the firm used almost all its earnings in expanding overseas. Revenue for the firm is expected to rise by 24%.
Pacific Crest has an Overweight rating on the stock with a price target of $122. Netflix, Inc. has an average rating on Buy and a consensus price target of $117.42. At around 10.15 AM EDT today, Netflix shares were up 0.05% at $108.17. Year to date, the stock is up over 120% while in the last one-month, the stock is up almost 13%.