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Netflix Stock Price Has Limited Upside, Analysts Say

Netflix shares

Netflix (NASDAQ: NFLX) stock price bounced sharply after reporting strong revenue and earnings growth. Lower than expected growth in subscribers had created a limited impact on NFLX shares after earnings.

However, the market analysts are not confident about the sustainable share price momentum. Some analysts believe investors are enjoying post-earnings bounce but the stock is likely to remain range-bound in the following months of this year.

Analysts See Limited Netflix Stock Price Growth

The company reported global streaming paid net adds around 6.77M, down from the guidance of 7 million subscribers.

RBC’s Mark Mahaney says they are less bullish on Global Subs Adds and pricing power. However, the analyst has expressed confidence in margins. The analyst is bullish about the long-term despite expectations for slower growth in the short-term.

NFLX Netflix, Inc. daily Stock Chart

NFLX shares dropped sharply in the past couple of months amid trader’s concerns over competition from two new players. Netflix management has loudly announced that they are not seeing any competition from Apple (NASDAQ: AAPL) and Disney (NYSE: DIS) streaming services.

Barclays, on the other hand, is still showing concerns over the entry of new players. The firm says concerns regarding the impact of the launch of competing services are going nowhere until at least early 2020. The firm predicts that despite a post-earnings bounce, Netflix stock price is likely to remain range-bound.

Financial Numbers Added to Investors Sentiment

Netflix reported revenue of $5.25 billion in the third quarter, up 31% from the past year period. It has also experienced significant growth in margins.

The company’s operating margin increased to 18.7% from 12% in the same period last year. Therefore, its third-quarter operating income doubled compared to the prior-year quarter.

Its CEO said, “As we’ve improved the variety, diversity, and quality of our content slate, member engagement has grown, revenue has increased, and we’re able to further fund our content investment.

Overall, Netflix stock price received much-needed support from financial numbers. However, analysts are showing concerns over lower than expected subscriber’s growth.

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.