Truist cuts Netflix estimates, stays on sidelines into earnings

A look ahead at Netflix's (NASDAQ:NFLX)$Netflix(NFLX)$ highly anticipated earnings report has led to newly lowered estimates at Truist Securities, which is staying Neutral on the stock as it evaluates the advertising opportunity ahead.

Mobile app download growth - a proxy for gross subscriber additions - decelerated a bit in the second quarter, thanks to slowdowns in the U.S./Canada and Asia Pacific, analyst Matthew Thornton says. And he's in line with his expectations on subscribers (after the company guided to a 2M drop in subs), implying a modest improvement in churn.

He's now expecting revenues to come in slightly worse than the rest of the Street, at $7.97B, with EBIT of $1.73B. That's due to expectations that foreign exchange will become a 2-point-plus headwind by the end of the quarter compared to when Netflix issued guidance.

Looking ahead to the third quarter, assuming a 2M-subscriber drop in Q2, he notes "recent seasonality" implies gains of 0.8M to 2.1M; he expects 1.5M net adds, benefiting from a stronger content slate. He sees Q3 revenues at $7.9B, vs. consensus for $8.12B.

Turning to the advertising story: The planned ad-subsidized service tier could add $1B in incremental revenue by 2025 - if it launches in 2023, and an incremental $0.9B in revenue across international (assuming a 2024 launch there), he says.

The company is benefiting from improved risk/reward, he points out (an unsurprising development after Netflix (NFLX) lost half its market value this year), and as low-cost entertainment is likely to be more durable in a recession vs. areas reliant on brand advertising, or larger-ticket consumer purchases. But competition is still rising, macro factors will have an impact on churn, and there's "low visibility" from here.

He's trimmed his price target to $210 from the previous $300; the stock is up 2.1% today and so the target currently implies 18% upside.

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  • PandoraHaggai
    ·2022-07-05
    Hopefully the churn will turn around in the next few quarters.
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    • xuero
      I hope so too...with the company exploring into more business segments, it may become stronger. [Bless]
      2022-07-06
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  • EugeneH
    ·2022-07-05
    help to like thx
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    • MamaLee
      Ok
      2022-07-05
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  • Maria_yy
    ·2022-07-05
    Isn't $210 a bit low?
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  • SandDust
    ·2022-07-05
    Can anyone tell me how to earn the coin for Bullish/ Bearish on 1 stock? Appreciated
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  • DMan
    ·2022-07-05
    I doubt they will see the covid results happen ever again.
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  • Iron man
    ·2022-07-05
    The market is still unstable very difficult sailing through stormy sea.
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  • BryanLSL
    ·2022-07-05
    Thank you for your post.
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  • EvanHolt
    ·2022-07-05
    Now is not the time to invest in this company.
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  • nancyrojo
    ·2022-07-05

    Good luck 

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    • nancyrojo
      🤣🤣🤣
      2022-07-08
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  • SGboy
    ·2022-07-05
    Recession coming with High inflation.
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  • ElvisMarner
    ·2022-07-05
    The days of Netflix are over.
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  • Tiger Rookie
    ·2022-07-05
    Thanks for your insightful sharing 😊
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  • JJQSL
    ·2022-07-07
    Thanks for sharing.. interesting
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  • PandoraHaggai
    ·2022-07-06
    What good words, I learned a lot.
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  • EasonWong88
    ·2022-07-06
    很棒的文章。谢谢分享。
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  • MortimerDodd
    ·2022-07-05
    Great post, looking forward to your next post.
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  • DonnaMay
    ·2022-07-05
    Matthew Thornton's argument is worth paying attention to.
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  • breadnbutter
    ·2022-07-05
    is netflix recession proof?
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  • jethro
    ·2022-07-05
    thanks for the share
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  • Toby_Chua
    ·2022-07-05
    lower low n wait to enter
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