Analysts were divided on their opinions on Netflix Inc. ahead of its quarterly results this week.
KeyBanc analyst Justin Patterson notes that Netflix’s price increase was more significant than anticipated, which he believes implies a 1 percent lift to his/Street 2022 revenue.
Nonetheless, the analyst has unchanged estimates due to the proximity of earnings, which should shed light on UCAN and international performance, confidence in 2022’s content slate, and investment levels.
Patterson maintained an Overweight rating and a price target of $620 on the shares (17.9 percent upside). He believes Netflix is better able to weather industry challenges than peers and is still poised for greater than 20 percent annual EPS growth.
JPMorgan analyst Doug Anmuth believes the price increase Netflix announced on Friday will drive an incremental $1 billion-plus revenue in 2022.
Each successive price increase “could drive a bit more friction,” but Netflix is willing to trade off a small number of subscribers for incremental revenue, and most of them come back anyway, Anmuth notes.
He thinks the incremental revenue will help finance increased content spending, which he projects at $19 billion in 2022 cash costs, and “also add some cushion to operating margin expansion.” Anmuth keeps an Overweight rating on Netflix with a $725 price target (37.9 percent upside).
Wedbush analyst Michael Pachter notes that a week before its Q4 report, Netflix announced price increases in its UCAN region.
The analyst also points out that typically, the company raises prices when its subscriber additions are substantial, so he suspects that chatter about a subscriber “miss” may be misguided.
Pachter has an Underperform rating and a price target of $342 on the shares (34.9 percent downside).
Deutsche Bank analyst Bryan Kraft lowered the price target on Netflix to $580 from $590 (10.3 percent upside) and reiterated a Hold rating on the shares.
Third-party data that is used to gauge the company’s Q4 net additions “has not been encouraging,” Kraft tells investors in a research note.
The analyst’s analysis of Google trends data leads him to lower his Q4 net add an estimate to 7.25 million compared to Netflix’s guidance of 8.5 million.
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