Kim Hong-Ji / Reuters
Netflix’s second quarter figures have greatly disappointed investors, however Wall Street corporations see the report primarily as an obstacle along the way.
The transmission giant reported earnings of $6.2 billion, just above analyst estimates. Subscriber additions also outperformed, with Netflix attracting more than 10 million new users compared to the expected 8.3 million.
On Friday, the company’s inventory fell by 8%. But analysts covering Netflix are still optimistic. Some pointed to a strong channeling of content as a harbinger of continued success. Others predicted a sharp decline in subscriber additions as savings resumed and house activity declined.
Here’s what 3 analysts said about the lack of brightness and direction Netflix shares are taking.
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The company’s lighter-than-expected guidance and strong second-quarter subscriber growth suggested that some of its demand arrived sooner than expected, analysts led by Maria Ripps said Friday. Management’s reiteration that second-half content is largely on schedule should keep subscriber additions stable and insulated from the coronavirus pandemic, they added.
Canaccord Genuity maintained a “buy” score for Netflix shares, with a target value of $550.
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Analysts led through Douglas Mitchelson downgraded Netflix’s inventory to “neutral” by “overcoming” as a result of the deficit, causing “the lack of catalysts in the short term.” As serious investor considerations about the festival and content quality have faded, Netflix’s inventory is now affected by slowing subscriber expansion and the resumption of key threats.
Competitive content, which adds sports, theatrical releases and revamped TV content, will likely bring audiences back to legacy platforms, analysts said. Credit Suisse also expects costs to rise by the maturity of 2020 or mid-2021, “they are likely to prevent net additions.”
“Investors’ interest in Netflix as a “winner” at home can decline with the reopening of countries,” Credit Suisse said.
The company reduced its target value to $525, which is consistent with a constant percentage of $550.
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JPMorgan analysts set the value target of the three, expecting stocks to be released to $625 over the next year and reiterating an “overlay” rating.
The bank stated the advance of subscribers and their effects on the third quarter outlook, saying it would “make Netflix a larger company on 24/12/36 months” as more people are exposed to the product. There is also more space in the foreign market to enter, they added.
Overall, Friday’s percentage decline represents a buying opportunity, JPMorgan said.
“Netflix inventories traded 9% after the market given the highest expectations and recent inventory appreciation, but we did it downwards,” the team wrote.
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