The Netflix AnalystKeyBanc Capital Markets analyst Justin Patterson maintained a 'sector-weight' rating on Netflix shares.
The Netflix ThesisKeyBanc sees "more questions than answers" in Netflix's second-quarter earnings report, Patterson said in a note. Net adds delivered upside but the content was weighted toward the January-July period, the analyst said.
Advertising is making progress but it will skew toward a few markets in 2023, Patterson added.
The analyst also noted that operating margin guidance suggests the metric is on track but only on a forex-neutral basis.
"Given these dynamics, it is hard for us to envision Netflix returning to low-to-mid-teens revenue growth or 20 percent+ reported operating margin over the near term," Patterson said.
Delving into the results, the analyst said he is encouraged by the outperformance of paid net adds in the APAC and LatAm regions. Netflix hinted that the ad-supported option will launch by early 2023 and start in select markets, the analyst noted. He is of the view the company could target U.S. and Canada and Western Europe initially.
KeyBanc lowered its 2022 and 2023 revenue and earnings per share estimates but raised 2024 revenue and EPS estimates slightly to give effect to some ad contribution by then.