Netflix Stock: Predicting Strong Quarter Ahead

The stock price of Netflix, Inc. (NFLX) increased about 5% on Tuesday, closing at $634.81.

The company is the industry leader in streaming video because of its unique and diversified services. Netflix is well-positioned for future growth, thanks to its growing collection of unique content and its global development strategy.

However, owing to increased competition from other companies such as Apple (AAPL), Amazon Prime (AMZN), and others, the firm has been witnessing slowing subscriber growth.

Accordingly, the stock has gained only 25% over the past year and 21% on a year-to-date basis.

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Why are Analysts Enthused?

Netflix investors are in for some good news.

Netflix’s Korean survival drama, “Squid Game,” which premiered last month, is likely to be the most popular non-English show in the streaming platform’s history. According to reports, the show has been a huge hit, as seen by the amount of conversation on applications like TikTok and Twitter (TWTR).

Another intriguing piece of news comes from a recent Piper Sandler (PIPR) semiannual study of 10,000 teenagers in the United States. According to the survey, Netflix ranked first in streaming-media consumption among teenagers, garnering 32% of total daily viewing, followed by Alphabet’s (GOOGL) YouTube with 30%. Hulu and Disney+, both owned by Walt Disney (DIS), got 8% and 7% of the market, respectively. Others, such as AT&T’s (T) HBO Max and Amazon’s Prime Video, contributed to the rest.

These data clearly show that, despite its decline in subscription numbers, Netflix remains a popular choice among teens.

Q3 Earnings on its Way

The company is scheduled to disclose its third-quarter 2021 earnings on October 19. Analysts on average expect Netflix to post earnings of $2.57 per share and revenues of $7.48 billion for Q3.

Meanwhile, the Earnings Whisper number, or the Street’s unofficial view on earnings, stands at earnings of $2.70 per share.  

Undoubtedly, during the previous several quarters, this streaming company has had growing trouble attracting new members.

However, with Netflix expending efforts in novel ways to capture new customers on a worldwide scale, it will be fascinating to see whether the business can pick up its subscriber growth statistics this quarter, or if the future holds more of the same.

Analysts’ Take on Netflix

Ahead of the Q3 earnings release, Cowen conducted a third-quarter study of 2,500 U.S. consumers. According to the survey’s findings, Netflix offers the finest video content and is the most popular service for watching videos, ahead of “Other” platforms and basic cable.

Based on the poll results, John Blackledge of Cowen expects Netflix to report strong earnings in the upcoming quarter. Additionally, he expects Netflix to report low subscriber churn and strong net additions in Q3.

The five-star analyst reiterated a Buy rating on the stock and a price target of $650.00 per share. This implies 2.4% upside potential to current levels.

Netflix stock has a Moderate Buy consensus rating, based on 24 Buys, 5 Holds, and 3 Sells, assigned in the past three months.

As for the price target, the average NFLX price target of $629.27 implies that shares are fully valued at current levels.

Disclosure: On the date of publication, Shalu Saraf had no position in any of the companies discussed in this article.

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