Netflix has been a Wall Street favourite throughout the year, with the company’s shares more than doubling since the start of 2015 to hold the title of top performing stock in the S&P 500. The firm reported earnings on Wednesday night.
The company’s internet TV service grew to 65.6m subscribers in the second quarter, with many attributing that growth to the popularity of Netflix’s original series such as Orange is the New Black and House of Cards.
Analysts were also keeping a close eye on the growth in subscribers outside of the US market. Netflix also won on this measure, with subscribers jumping by 2.37m to 23.3m internationally versus analyst estimates of a 1.94m increase.
Analysts covering the stock are sending out updated research to their clients.
Bank of America Merrill Lynch’s Nat Schindler, Justin Post, and Jason Mitchell:
Despite the second quarter being Netflix’s seasonally weakest quarter, Netflix re-accelerated net sub additions year-on-year likely due to strong slate of second quarter content releases including Daredevil, Sense8, Grace and Frankie, and Orange is the New Black Season 3. We reiterate our ‘Buy’ rating and raise our target from $103 to $121 based on our sum-of-parts valuation.
Macquarie’s Tim Nollen and Ankesh Agarwala:
Solid beat. Netflix second quarter subscriptions and contribution to margins came in well above guidance, and earnings per share of $0.06 beat our and consensus of $0.04; pre-stock split earnings per share was $0.42 versus our $0.28 estimate...We are raising our target price to $113.
Morgan Stanley’s Benjamin Swinburne and Thomas Yeh:
The second-quarter results and third quarter guidance continue to show growing demand for Netflix product, as subscriber metrics exceeded second quarter guidance and third-quarter expectations. Importantly, the pre-2014 international markets are now all profitable, and visibility into long-term profits is improving.
Pacific Crest’s Andy Hargreaves and Evan Wingren:
We recommend owning Netflix. Second-quarter results beat estimates and support the view that Netflix is accelerating away from competition. While we believe recent appreciation has hurt the risk/reward around the shares, the company’s dominant position and pending global launch warrant it being a core holding.
Piper Jaffray’s Michael J. Olson and Yung Kim:
We maintain our ‘neutral’ rating, with a positive long-term bias, based on our analysis that suggests earnings per share growth from 2017-2020 will [be very strong].
Netflix, however, has been a volatile name in recent years and while we expect the general trend to be “up and to the right”, we also expect periodic pull-backs and would encourage investors to take advantage of more attractive entry points.
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