Netflix Analysts Break Down Q3 Earnings: ‘Solid Recovery With Large Content Launches Ahead’

1 year ago 208

Netflix Inc. shares traded little Wednesday aft the institution reported a third-quarter net beat.

Netflix reported third-quarter adjusted net per stock (EPS) of $3.19, beating statement expert estimates of $2.56. Third-quarter gross was $7.48 billion, up 16.3 percent from a twelvemonth agone and in-line with expert estimates.

Netflix besides reported 4.4 cardinal nett caller paid subscribers, good up of Wall Street expectations of 3.84 cardinal subscribers. That fig was apt boosted by the company’s deed Korean play “Squid Game,” which Netflix said was viewed by 142 cardinal subordinate households successful the archetypal 4 weeks pursuing its release.

Looking ahead, Netflix guided for 8.5 cardinal subscriber additions successful the 4th quarter. It’s besides expecting Q4 gross of $7.7 cardinal and profits of 80 cents per share. The institution besides said it expects to beryllium break-even connected currency travel for the afloat twelvemonth successful 2021 and currency travel affirmative starting successful 2022.

Bullish 2022 Outlook

Morgan Stanley expert Benjamin Swinburne said the awesome third-quarter numbers springiness him accrued assurance successful his bullish outlook for different beardown twelvemonth of maturation successful 2022.

“The beardown 4Q guidance builds disconnected a amended than expected 3Q and reinforces the concern lawsuit for NFLX shares arsenic it begins to exit the COVID related impacts to the concern implicit the past 18 months,” Swinburne wrote successful a note.

Truist expert Matthew Thornton said archetypal content, gaming upside, and stock buybacks should proceed to enactment the stock.

“We stay constructive fixed the beardown contented path, nascent gaming narrative, and buybacks, with our semipermanent thesis unchanged (durable/predictable/growing halfway with optionality),” Thornton wrote.

Rosenblatt Securities expert Mark Zgutowicz estimates “Squid Games” unsocial contributed astir 900,000 nett subscriber additions successful the 3rd quarter.

“And portion immoderate whitethorn reason 4Q’s 8.5M nett adhd usher could spot a humble beat, the information that absorption did not usher higher—despite a mammoth 142M views of Squid Game, +75 percent supra its anterior all-time starring rubric Bridgerton—suggests to america a deficiency of assurance successful meeting/exceeding the contiguous 2022 bar,” Zgutowicz wrote.

Impressive Content Slate

Bank of America expert Nat Schindler said Netflix’s numbers represented a “solid betterment with ample contented launches ahead.”

“We proceed to spot a agelong runway for Netflix to summation its marketplace stock from linear TV, and we judge that it is successful a beardown presumption to proceed raising prices arsenic its engagement continues to increase,” Schindler wrote.

KeyBanc expert Justin Patterson said Netflix’s fourth-quarter contented slate is unprecedented.

“Given momentum entering the 4th and Netflix’s unprecedented 4Q slate (e.g., Money Heist Part 2, The Witcher, large films, etc.), we judge determination is an upward bias to estimates, peculiarly arsenic APAC ramps,” Patterson wrote.

BMO Capital Markets expert Daniel Salmon said “Squid Game” is conscionable the opening of a beardown upcoming contented slate for Netflix heading into 2022.

“We deliberation much dynamic monetization of NFLX increasing owned contented assets similar selective licensing to ad-supported streaming services could make a limb higher from our existent view,” Salmon wrote.

Premium Valuation

Raymond James expert Andrew Marok said subscriber guidance for the 4th fourth and 2022 was mostly in-line with expectations, but Netflix shares are appropriately valued astatine astir 9 times 2022 sales.

“The coagulated 4Q usher goes immoderate mode toward easing concerns astir the sustainability of request trends, and a much balanced contented pipeline successful 2022 should usher successful somewhat of a instrumentality to normal,” Marok wrote.

Wells Fargo expert Steven Cahall said Netflix shares are expensive, but the company’s quality to consistently turn net and adhd subscribers makes the banal worthy of a premium valuation.

“We deliberation valuation is the incorrect happening to absorption on, portion prime and sustainability of maturation is the close happening and the effect of compelling lawsuit acquisition and retention efforts,” Cahall wrote.

Needham expert Laura Martin said Netflix needs to adhd an add-supported, lower-priced subscription tier to grow its full addressable marketplace and stave disconnected lower-priced competitors.

“Without a little outgo tier, we judge churn volition emergence successful NFLX’s highest ARPU markets owing to the ‘digital attraction recession’ arsenic planetary economies proceed to reopen implicit the adjacent 12 months,” Martin wrote.

Ratings and Price Targets

  • Morgan Stanley has an Overweight standing and $700 target.
  • Bank of America has a Buy standing and $750 target.
  • Raymond James has a Market Perform rating.
  • BMO Capital Markets has an Outperform standing and $700 target.
  • Rosenblatt Securities has a Neutral standing and $450 target.
  • Wells Fargo has an Overweight standing and $800 target.
  • Truist has a Buy standing and $690 target.
  • Needham has an Underperform rating.
  • KeyBanc has an Overweight standing and $690 target.

By Wayne Duggan

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