Netflix (NFLX:NSD) is set to release its second-quarter financial results on July 19, 2023. The company’s recent initiatives, such as cracking down on password sharing and introducing ad-supported plans, are expected to drive its financial performance and paid membership base. However, analysts believe that the Netflix stock price already reflects these positive factors, considering the significant rise in NFLX shares year-to-date and over the past year. Let’s delve into the details of the Netflix stock forecast.
Q2 Expectations: Revenue Growth and Earnings Decline
Wall Street analysts anticipate Netflix to report Q2 revenue of $8.28 billion, surpassing the $7.97 billion recorded in the same quarter last year. The expected revenue also exceeds the company’s own guidance of $8.2 billion, indicating a slight sequential improvement. On the other hand, analysts project NFLX to post earnings of $2.85 per share, reflecting a decline both year-over-year and sequentially.
The crackdown on password sharing and the introduction of the new ad plan are expected to contribute to the earnings, driven by higher average revenue per member in the U.S. However, the reduction in prices in certain countries to drive long-term adoption may impact short-term profitability, while tough year-over-year comparisons could also weigh on the results.
Website Traffic: Mixed Growth Signals
Netflix’s strong content lineup continues to drive engagement, a crucial factor for customer retention and growth. According to STA Resrach, NFLX experienced a decline in traffic on a sequential basis but witnessed an increase compared to the same quarter last year. Visits to netflix.com were down by 6.9% quarter-over-quarter in Q2, while website traffic saw a significant jump of 36.05% year-over-year during the same period.
Analyst Outlook: Cautious Optimism
Wall Street analysts generally view Netflix as a winner in the streaming space, with expectations that the company will weather the SAG–AFTRA strike due to its robust content pipeline. However, the substantial growth in NFLX stock has led to cautious optimism among analysts regarding its future potential.
Loop Capital analyst Alan Gould raised the price target for NFLX to $425 from $330 but maintained a Hold recommendation due to the recent surge in share price. On the other hand, Deutsche Bank analyst Bryan Kraft reiterated a Buy recommendation and increased Netflix’s price target to $475 from $410. Kraft praised the company’s strong revenue, earnings, and free cash flow growth capabilities.
Overall Market Sentiment and Price Target
Netflix currently holds a Buy consensus rating on Stock Target Advisor, based on 30 analyst ratings. However, considering the recent appreciation in Netflix stock price, the average price target of $395.23 implies a potential downside of 12.18% from current levels.
