Analysts Predict Strong Q2 For Netflix: What Should Investors Expect?
1min read According to analysts surveyed by FactSet, Netflix is expected to report second-quarter revenue of over $9.5 billion, with earnings per share soaring to $4.74.
After the market closed today, Netflix released its second-quarter financial report, and from the stock price perspective, it still has a lot to prove.
The recent stock price of the streaming company is $647.46, up around 40% since the beginning of the year. This is twice the 17% increase of the S&P 500 index.
However, even though Wall Street's consensus expectation for the company's earnings this year exceeds 35 times, the buy rating for the company's stock still exceeds the hold rating by a ratio of two to one.
Wedbush analyst Alicia Reese wrote last week when reiterating her Outperform rating: Netflix has managed to establish a virtually insurmountable lead in the streaming wars, and we expect competitors to continue to flail while trying to replicate Netflix's business model.
Reese pointed out that Netflix will eventually shift from a high-growth, low-profit business to a slow-growth, high-profit business, but she and other analysts unanimously expect that the financial report in June will not show slow growth.
Analysts surveyed by FactSet expect second-quarter revenue to exceed $9.5 billion, up 16% year-over-year, with profits soaring 44% to $4.74 per share.
Netflix's stock price slipped in April when the company said it would stop counting the number of users quarterly in 2025. Some investors believe this means user growth is about to end. The subsequent rise in stock prices indicates that this concern has dissipated.
But that does not mean that the membership trend will not be scrutinized in the June financial report. The sell-side consensus expects Netflix to add about 4.5 million net users this quarter, most of which are international users, bringing the total number of users to 274.5 million.
Of course, more importantly, are the expectations of buy-side fund managers and individuals. Guggenheim Securities reported on Wednesday that the expectations of fund managers are higher, that is, more than 8 million net new users this quarter.
Other matters worth paying attention to include the performance of the new ad-supported tier of streaming. WEDBUSH's Reese believes that Netflix is close to the stage where the ad layer begins to contribute to revenue and profit growth. This will help to improve the operating profit margin, from her forecasted strong level of 26.4% in June to a level close to 30% in the coming years.
We believe Netflix will continue to expand profitability and generate increasing free cash flow, supporting our Outperform rating, Reese said.