Netflix shares have been on the decline, off more than 14 percent this year, and down 26 percent from the all-time high set last year, dragged down by a wave of negative analyst sentiment.
Where the stock goes next hinges on what kind of subscriber numbers and forecasts the company reveals when it reports earnings after the bell Monday.
The company projected in its last earnings release that it would add 2.5 million new subscribers in the quarter — half a million in the U.S. Analysts are projecting slightly stronger growth — a total of 2.63 million new streaming subscribers in the quarter. But even those stronger Wall Street projections are a significant decline from the year-ago quarter, when the company added 3.28 million new subscribers as it ramped up its international rollout.
Perhaps even more important than this quarter's numbers is what kind of outlook CEO Reed Hastings provides for the third quarter. In Q3, analysts anticipate the addition of 774,000 U.S. subscribers and 2.85 million overseas. The stock could swing — in either direction — depending on how the numbers come in compared with these Wall Street projections.
Then there's the questions of whether Netflix's market is getting saturated, with Hulu and Amazon investing more in original content, and Amazon launching its stand-alone video app. But many analysts are still bullish. JPMorgan's Doug Anmuth says his longer-term thesis remains unchanged despite all the volatility since its last earnings report. Anmuth believes the company's guidance for international additions could be conservative, in light of the follow-through from launches in Japan, Spain, Portugal and Italy, as well as the huge popularity of its French original "Marseille."
"Netflix has been in heavy investment mode and still growing profit through scale, with a commitment to global profitability in 2017," Anmuth wrote.
Jefferies media analysts are more skeptical, lowering the price target on the stock to $80, and downgrading their rating from hold to underperform. The analysts conducted a proprietary survey on understanding differences in price sensitivity and content preferences. "The survey suggests that an increasing price point is an issue with both existing subscribers as well as non-subscribers. Surprisingly, the survey highlighted that both subscribers and non-subscribers may be more attracted to current TV/movies than Netflix originals," the Jefferies' survey said.
And UBS warns that Netflix app downloads in the second quarter showed a softening in southern Europe, France and Germany, but found consistency elsewhere. UBS lowered its projections for the third quarter, but still has a buy rating on the stock.
Correction: This story was revised to correct the spelling of Jefferies.