<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="There's been a notable change in appetite for Netflix, Inc. (NASDAQ:NFLX) shares in the week since its second-quarter report, with the stock down 10% to US$493. Revenues were in line with forecasts, at US$6.1b, although statutory earnings per share came in 12% below what the analysts expected, at US$1.59 per share. This is an important time for investors, as they can track a company’s performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.” data-reactid=”20″>There’s been a notable change in appetite for Netflix, Inc. (NASDAQ:NFLX) shares in the week since its second-quarter report, with the stock down 10% to US$493. Revenues were in line with forecasts, at US$6.1b, although statutory earnings per share came in 12% below what the analysts expected, at US$1.59 per share. This is an important time for investors, as they can track a company’s performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content=" View our latest analysis for Netflix ” data-reactid=”21″>View our latest analysis for Netflix
Taking into account the latest results, the current consensus from Netflix’s 34 analysts is for revenues of US$24.8b in 2020, which would reflect a meaningful 9.8% increase on its sales over the past 12 months. Statutory per share are forecast to be US$6.23, approximately in line with the last 12 months. Before this earnings report, the analysts had been forecasting revenues of US$24.8b and earnings per share (EPS) of US$6.49 in 2020. The analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share numbers for next year.
Despite cutting their earnings forecasts,the analysts have lifted their price target 7.4% to US$488, suggesting that these impacts are not expected to weigh on the stock’s value in the long term. The consensus price target is just an average of individual analyst targets, so – it could be handy to see how wide the range of underlying estimates is. The most optimistic Netflix analyst has a price target of US$625 per share, while the most pessimistic values it at US$182. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that Netflix’s revenue growth is expected to slow, with forecast 9.8% increase next year well below the historical 26%p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 14% per year. Factoring in the forecast slowdown in growth, it seems obvious that Netflix is also expected to grow slower than other industry participants.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Netflix. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations – although our data does suggest that Netflix’s revenues are expected to perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="With that in mind, we wouldn't be too quick to come to a conclusion on Netflix. Long-term earnings power is much more important than next year's profits. We have estimates – from multiple Netflix analysts – going out to 2024, and you can see them free on our platform here.” data-reactid=”39″>With that in mind, we wouldn’t be too quick to come to a conclusion on Netflix. Long-term earnings power is much more important than next year’s profits. We have estimates – from multiple Netflix analysts – going out to 2024, and you can see them free on our platform here.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected].” data-reactid=”45″>This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected].
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