Early Look at Netflix Q2
App data and search interest trends indicate subscriber growth is ahead of schedule for the latest quarter, according to Stifel. The analyst, Scott Devitt, raised his price target to $500 on Wednesday ahead of Netflix’s earnings report on Thursday, July 16.
Subscriber outlook: Stifel expects about 10 million global paid net subscribers were added in the second quarter, ahead of Netflix’s guidance for 7.5 million. Stifel forecasts Netflix will end the quarter with 193 million paid subscribers.
Wells Fargo Securities is not as bullish for subscriber adds as Stifel is. Analyst Steven Cahall says “the most interesting thing about the 2Q20 print is it likely sets a new plateauish level for NFLX subs for a bit.” He raised his Q2 net add estimate from 8 million to 8.5 million.
Top risks to subscriber adds: Devitt acknowledges temporary household consolidation, password sharing, and the skew towards mobile-only subscription plans in Asia Pacific markets as factors that could weigh on subscriber growth.
Asia Pacific upside: Stifel cites app download data that suggests strong traction in APAC early in the quarter.
“With an addressable market of approximately ~150mm broadband households and a 13% penetration (versus 30% overall), accelerated adoption of Netflix in APAC (and other international markets) could drive upside to Street sub estimates.” Overall Netflix app downloads increased 10% y/y in the quarter, compared to a drop of 8% y/y in the first quarter.
