Wall Street Not Abandoning Netflix After Drop: Research Recap

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Wall Street was thick with analyst notes on Netflix (NFLX) yesterday after the streaming-media darling fell on weak subscriber growth.

The research was surprisingly positive given the news. Here’s a summary of a few big takeaways.

First, some analysts tried to cast the subscriber miss in a positive light. Oppenheimer and Piper Jaffray, for instance, said potential customers may have been too distracted with the World Cup to sign up. Credit Suisse didn’t mention soccer, but echoed a similar theme by stressing that the miss resulted from weak gross additions rather than attrition (churn).

Another theme was the idea that NFLX has been so successful growing that it will inevitably struggle to expand at the same pace. Deutsche Bank, the only firm that seemed to issue a downgrade, said investors need to scale back their expectations given the stock price has already doubled in 2018. Its note said the slowdown didn’t change the long-term positive thesis. RBC echoed that sentiment and sees the potential for business acceleration into yearend.

Bank of America saw the glass half-full, even as it lowered its price target from $470 to $410. Their analyst said guidance for the current quarter is likely conservative, and added that Reed Hastings’ company “never misses twice.”

NFLX slid as much as 14 percent at one point, which would have been its biggest drop in over two years. But buyers quickly stepped in and the stock closed down just 5 percent to $379.48. The session was also off the charts in terms of volume, with the most stock and options turnover in about three years.

Interestingly, more than one analyst actually issued upgrades. BMO and Stifel, for instance, hiked their ratings from “hold” to “buy.”

Morgan Stanley and JPMorgan Chase also advised clients to buy the pullback without changing their ratings.

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David Russell is VP of Content Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.