Netflix (NASDAQ:NFLX) will announce its second-quarter financial results on Wednesday, July 19, 2023. Ahead of Q2 earnings, it’s important to know that the company’s recent initiatives, including the crackdown on password sharing and the launch of ad-supported plans, will likely drive Q2 financials and the paid membership base.
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While its efforts to monetize its platform efficiently augur well for growth, analysts’ average price target ahead of the Q2 print indicates that positives are already reflected in the stock price. For instance, NFLX stock has risen quite a lot (about 53% year-to-date and 138% in one year), which implies that the upside potential could be capped. Further, our Website Traffic tool shows a sequential slowdown. Let’s dig deeper.
Netflix – Q2 Expectations
Wall Street expects Netflix to report revenue of $8.28 billion in Q2, which compares favorably to the prior-year quarter’s revenue of $7.97 billion. Moreover, it is higher than the company’s guidance of $8.2 billion and shows a slight sequential improvement.
On the bottom line front, analysts expect NFLX to post earnings of $2.85 per share, reflecting a decline on a year-over-year and sequential basis. The company’s EPS is expected to benefit from the crackdown on password sharing and the new ad plan, which is generating higher average revenue per member in the U.S. (subscription + ads) compared to the standard plan.
However, the reduction in price in several countries to drive adoption in the long term could hurt near-term profit. Further, tough year-over-year comparisons could remain a drag.
Website Traffic Shows Mixed Growth
Netflix’s solid content slate consistently drives engagement, which is crucial for customer retention and growth. TipRanks’ website traffic screener shows that traffic declined for NFLX on a sequential basis but increased from the year-ago quarter.
Per the tool, the number of visits to netflix.com was down 6.9% quarter-over-quarter in Q2. However, website traffic jumped 36.05% on a year-over-year basis in Q2. Learn how Website Traffic can help you research your favorite stocks.
Is Netflix a Buy or Sell?
Wall Street analysts see Netflix as a winner in the streaming space. Further, they expect NFLX to remain shielded from the SAG–AFTRA (Screen Actors Guild – American Federation of Television and Radio Artists) strike due to its solid content pipeline. However, the considerable growth in its stock keeps analysts cautious in their optimism about further growth in NFLX stock.
Heading into the earnings, Loop Capital analyst Alan Gould increased NFLX’s price target to $425 from $330 on July 17. However, the analyst reiterated a Hold recommendation given the recent run in its share price.
On a more positive note, Deutsche Bank analyst Bryan Kraft maintained a Buy recommendation on NFLX stock on July 17. The firm also raised Netflix’s price target to $475 from $410. The analyst lauded the company’s solid revenue, earnings, and free cash flow growth capabilities.
Overall, NFLX stock sports a Moderate Buy consensus rating on TipRanks, reflecting 19 Buy, 14 Hold, and two Sell recommendations. Moreover, due to the recent appreciation in stock price, analysts’ average price target of $424.63 implies 5.65% downside potential.
