Shares of Netflix Inc. surged Monday, on track for the first gain in six sessions, after a Piper Jaffray analyst said he expects the video streaming giant to beat second-quarter U.S. subscriber growth expectations.
Analyst Michael Olson said while a preliminary reading of his “Netflix Search Index,” which is based on an analysis of search trends utilizing Alphabet Inc.’s Google GOOGL, +1.02% , points to year-over-year 11.7% growth in U.S. subscribers, while Netflix’s guidance called for an increase of 8.2%. Read more about Q1 results and Q2 guidance.
For international subscribers, the search index suggests 45.8% growth, while guidance called for a 36.5% rise.
The stock NFLX, +2.77% jumped 2.7% in morning trading, putting the stock on track to snap a five-session losing streak in which it shed 5.9%. That would mark the second-longest losing streak of the year, after the six-day streak that ended May 13.
Olson reiterated the overweight rating he’s had on the stock since at least back to October 2016, and kept his price target at $440, which is about 26% above current levels.
“We would not directly apply the [Netflix search] index’s implied growth rates and it is important to take note of historical error in our model, but the index is directionally positive for domestic and relatively in-line for international through two months of Q2,” Olson wrote.
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He said the index has historically overstated actual results by an average of 100 basis points (1 percentage point) over the past four quarters, while the four-quarter average overstatement for international is about 900 basis points.
Netflix is scheduled to report second-quarter results on July 17, after the closing bell. Analysts surveyed by FactSet are currently expecting earnings of 56 cents a share on average, down from 85 cents a year ago, while revenue is expected to increase 26% to $4.93 billion.
The company has beat EPS expectations the past six quarters, while topping revenue forecasts four times over the same six quarters.
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The stock has lost 2.9% the past three months but has rallied 31% year to date. In comparison, SPDR Communication Services Select Sector exchange-traded fund XLC, +0.98% has gained 3.6% over the past three months and the S&P 500 index SPX, +0.18% has tacked on 2.6%.
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