What will he bet on beyond subscriptions? – The Hollywood journalist


It won’t just be about subscribers and financials in Netflix’s quarterly earnings report and Tuesday, July 20 call.

Wall Street and Hollywood will also be watching management closely to potentially provide comment, or at least a signal, on direction on any new business initiative, such as unveiled milestones in video games and merchandise.

Since June, Netflix has opened an online store – where it sells property-based items like Strange things, The witcher and Bridgerton – hired an executive, Mike Verdu, formerly of Facebook and Electronic Arts, to explore opportunities in video games and signed an expansion to mega-producer Shonda Rhimes’ deal that will include movies, virtual reality content and games.

The “initial reaction from financial markets has been positive,” Bernstein analyst Todd Juenger wrote in a July 15 report on Netflix’s game rentals, but added: “There are dozens of different ways for Netflix to pursue video games “.

Juenger mentioned that some investors were wondering if “knowing the second quarter results and the third quarter guide will be seen as weak, Netflix has disclosed this story now in order to change the narrative, to distract, to distract from its business main “. But the analyst said: “In our opinion, the management of Netflix has never behaved in a way that one would expect them to engage in such short-term hijackings to try to impact / protect the course of action. “

As for Netflix’s latest subscriber update, management, led by co-CEOs Reed Hastings and Ted Sarandos, set the low bar of just 1 million new members in the second quarter which ended on June 30 after nearly 4 million net additions in the first quarter. , below expectations. That would compare to the 10 million subscribers gained in the second quarter of 2020 fueled by the coronavirus pandemic.

Wedbush analyst Michael Pachter reiterated his rating of “underperformance” Thursday and his price target of $ 342 on Netflix stock. He expects no change in the streamer’s subscriber base in the US and Canada, but growth of 1 million in international markets, “as expected, but below consensus of 1.97 million.”

Pachter argued, “Netflix has a huge first-mover advantage, with almost 210 million subscribers worldwide. This figure, however, belies the fact that Netflix is ​​approaching market saturation in North America, with its nearly 75 million members representing about 60% of all households. “

UBS analyst John Hodulik, who has a “buy” rating and a target price of $ 620 on the stock, pointed out that Netflix’s latest report is expected to mark the low point in terms of subscriber trends. “We expect Netflix’s second quarter results to reflect a period of digestion after consumers got carried away with streaming subscriptions during the pandemic – a theme we plan to play out across multiple industries,” he said. -he declares. “That said, app downloads suggest an increase in the management guide to 1 million net additions in the second quarter given the strength in Asia.”

As a result, it increased its projection to a subscriber gain of 1.9 million from 1 million, followed by net additions of 4.5 million in the third and 8.7 million in the fourth quarter.

Cowen analyst John Blackledge, who rates the stock to “outperform,” predicts subscriber additions of nearly 1.28 million, including 154,000 in North America, “given that Netflix is ​​still working through part of the massive withdrawal ‘due to the COVID-19 pandemic. “Management also announced a weighted content list around the second half of 2021.”

Much attention will be paid to Netflix’s third quarter subscriber forecast as it experienced the strongest pandemic outbreak in the first half of 2020, meaning subscriber comparisons became easier in the second half of the year. of the year.

“Street’s third-quarter estimates for 6 million net additions look aggressive, given a still relatively small content roster, the impact of a multi-regional price hike and a series of competitive launches. in international markets by Disney + and HBO, “warned Evercore ISI analyst Marc Mahaney.

And Benchmark’s Matt Harrigan wrote in a report on Friday, “We’re currently at 3.3 million for the third quarter, with skepticism dictated by global reopening activity despite the delta variant and a Netflix release schedule in the second quarter. semester generally backloaded. “

Morgan Stanley’s Benjamin Swinburne remained bullish, with an “overweight” rating and a price target of $ 650, in his preliminary report titled “Summer Break” just before the weekend. “A reopening of consumers and the lingering effects of 2020 production delays suggest a risk for the consensus estimates in the second and third quarters,” he wrote. “However, more content is on the way, supporting an increase in net additions in Q4 2021 / ’22.”



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