Evercore ISI analyst Vijay Jayant entitled his report about Netflix’s earnings update, with a nod to the streamer’s The Two Popes, “A Narrative for Each Pope.” He called the financial report “a mixed bag overall, with a fourth-quarter sub beat pretty much fully offset by a disappointing first-quarter sub guide.” He added: “Elsewhere, the release featured some good (improving engagement trends, commentary about a good content slate in the second quarter) and some not-so-good (international average revenue per user declined sequentially, with Asia-Pacific particularly below expectations), and we see little reason to change our longer-term thesis.”
All in all, Jayant reiterated his “in line” rating and $300 price target on Netflix’s stock.
One of the Street’s big Netflix bears, Wedbush Securities analyst Michael Pachter, in his report highlighted: “The pace of free cash flow improvement is slower than we had previously expected. Assuming continued improvement for the next 10 years, a discounted cash flow valuation yields a price target of $173.”
He has an “underperform” rating on Netflix with that $173 being his price target. “We anticipate higher levels of profitability to be offset by lower domestic subscriber growth as Netflix edges closer to market saturation,” Pachter added about the company’s U.S. growth challenges. “In addition, we expect Netflix’s renewed push into India to put pressure on international average subscription price growth.”
Bernstein analyst Todd Juenger was more upbeat, noting in his report’s title the new competition the streamer has seen from the likes of Disney+ and Apple TV+: “Nevertheless, Netflix Persisted.”
He argued that free cash flow losses have peaked and are “on track for about $1 billion sequential improvement with line-of-sight to break even.”
And he concluded that the new competition hasn’t unsettled the streaming giant. “Netflix U.S. subs responded to the Disney+ launch by watching more Netflix,” Juenger wrote. “With very little new original Disney+ content over the next several quarters, we think consumers will be reinforced in their appreciation of Netflix’s unique value proposition: ‘always something new to watch.'”
Overall, Juenger reiterated his “outperform” rating and $423 price target on Netflix shares.
Pivotal Research Group analyst Jeff Wlodarczak similarly summarized the latest results in his report’s title, saying “Netflix Delivers Yet Again.” “The bottom line is despite a material rise in supposed competition, the natural increase in absolute churn on a materially larger subscriber base and very healthy year-over-year increases in average revenue per user in all of their territories (constant currency) other than Asia-Pacific, Netflix did not see a much of a material overall net new subscriber slowdown year-over-year, which we view as fundamentally quite positive.”
Concluded the analyst: “The icing on the cake is the materially smaller than we expected free cash flow losses for 2020.” He reiterated his “buy” rating and price target of $425.
Netflix shares closed the day down 3.6 percent at $326.