Netflix 's second-quarter results set the table for a crucial second half of the year for the stock, as the company pushes into gaming and tries to prove it can grow subscribers after the pandemic, according to Wall Street analysts. The report was a mixed bag for Netflix. The streaming video company beat estimates for net paid subscriber adds and revenue, but earnings per share came in lighter than expected. Guidance for third-quarter subscribers also came in below expectations. Netflix shares are down about 1% on the year, closing Tuesday at $531.05 a share. The stock was little changed in premarket trading. JPMorgan's Doug Anmuth hiked his price target on the stock after the report to $625 per share from $600 and per share reiterated his overweight rating, saying in a note to clients that the report was solid enough to clear the way for a rebound. "This may seem counter-intuitive as our 2H subs come down & 2022 consensus net adds are likely to as well. However, we are increasingly confident in the 2H content slate & more reasonable expectations into 2022 should make NFLX safer to own," the JPMorgan note said. "'Clearing event' may be an overused phrase on NFLX near-term, but we believe it is appropriate nonetheless & NFLX still has significant global secular growth opportunity ahead." Other analysts took a wait-and-see approach on whether Netflix's upcoming content slate and push into gaming could boost subscribers. KeyBanc and Atlantic Equities, for example, maintained their bullish ratings but revised their estimates and price targets downward. Raymond James analyst Andrew Marok reiterated his market perform rating on the stock, saying shares would likely struggle until the new initiatives gained traction. "While we see potential from the 4Q slate and gaming launch, we believe there needs to be evidence of the ability to sustain healthy subscriber growth post-pandemic before the stock narrative improves," the Raymond James note said. Here's what other major analysts had to say after the report. Evercore ISI- Outperform rating, price target to $635 from $655 "Reit Outperform On Clearing Event: NFLX badly missed Q1 Subs estimates and faced very hard H1 Comps, as Netflix was one of the most notable COVID Winners, with record Sub Adds in H1:20. This caused NFLX shares to dislocate – declining almost 20% from early to mid '21 and underperforming the market YTD. But now we believe NLFX shares will begin to materially outperform." Barclays- Neutral rating, $625 price target "Netflix reported an expectedly weak net add quarter and a significantly weaker than expected 3Q guide. ... Overall, with the most difficult comp period behind it and ~17% underperformance vs broader markets this year, we believe NFLX stock could start working again, especially with new elements to the story like video gaming, merchandizing and buybacks." Citi- Neutral rating, $570 price target "NFLX also provided a softer-than-expected 3Q21 outlook at 3.5m net adds against consensus at 5.6m. Given NFLX remains a net add story, we expect weaker 2Q net adds in UCAN and a more cautious 3Q outlook than anticipated to see the stock open down." Morgan Stanley- Overweight rating, $650 price target "2Q results and 3Q guidance were broadly in-line but continue to reflect the COVID compares to 2020 and a reopening consumer. Looking to 4Q, content investment will ramp substantially and net adds should follow. Video games emerge as next content genre extension, but it remains early." KeyBanc- Overweight rating, price target to $645 from $650 "We feel incrementally better that relevant content is resonating and 2022E marks a return to more normal net add growth. As Netflix gets back to a ~27M net add cadence, we believe investor concerns over annual operating margin expansion likely moderate as focus shifts back to ~30% annual EPS growth and FCF inflections." BMO- Outperform rating, $700 target "More important near-term, we think a strong 2H content slate can help guide NFLX through choppy re-opening trends, while management continues to lean into the share buyback and support the stock. With tough comps behind it and FCF ramping despite early video game investment, we think investors should be aggressively building positions once again." Oppenheimer- Outperform rating, $620 target "We view NFLX's softer 3Q subscriber outlook from C19 pull-forwarding subs in '20 as transitory and overshadowing NFLX's underlying pricing power. Retention is improving despite ARM increasing 8% over the last two years, and members are consuming 17% more content relative to 2Q:19—impressive given production delays. ... With shares flat after market close despite the 3Q subscriber miss, investors appear to be assigning more value to earnings metrics a positive development, in our view." Bank of America- Buy rating, $680 target "We continue to believe neither the pandemic nor competition fundamentally altered Netflix's trajectory and see subscriber additions in'20 and '21 combined to be roughly on par with '18 and '19. Unfortunately, neither the 2Q results nor the 3Q guidance gives us much new to go on and we may have to wait until 4Q when key pandemic-delayed content will launch to really know. We continue to see a long runway for Netflix to increase their market share from linear TV, and we believe that they are in a strong position to continue to raises prices as their engagement continues to increase." Needham - Underperform, no target "Expanding into video games may be a good idea long term, but will add costs near term, won't impact revs during the next 12 months, and may signal NFLX feels it must expand into new forms of entertainment content to attract UCAN viewers" Cowen- Outperform rating, $650 target "Paid net adds of 1.54MM came in above guide of 1.0MM, with ~2/3 of net adds in APAC, while Op Income came in slightly below est's on Marketing exp. Meanwhile, engagement was 17% higher vs 2Q19, & churn was lower, underscoring the value prop amid NFLX's ongoing content investment. 3Q sub guide of 3.5MM was below est's, given pull-forward & reopenings." Wells Fargo- Overweight rating, $700 target "NFLX investors are a bit skiddish as the company works through the post-pandemic choppiness. While management has guided to a modest sub accel from Q2 to Q3 we think a record quarter for content in Q4 will drive a steeper sub curve and recatalyze the bull case. With the financial model strongly intact we remain bulls with an unchanged $700 price target." Stifel- Buy rating, $580 target "If our base case assessment proves accurate, Netflix shares would double over the next four years. In our view, now would be a good time to accumulate shares prior to evidence showing up later this year that the company remains on track to meet our longer-term projections." Atlantic Equities- Overweight rating, price target to $690 from $730 "We continue to view Netflix as the purest and most scalable investment in internet TV and reiterate our Overweight recommendation. We are reducing our PT from $730 to $690 on slightly reduced 2023 estimates." Baird- Outperform rating, $650 target "Notably, the company also confirmed plans to invest more in games, which opens a new content engagement opportunity, though we expect limited impact near-to-medium term. We remain positive on the long-term content leadership, growth opportunity and improving free cash flow." Guggenheim- Buy rating, $600 target "Netflix global net adds of 1.5mm outpaced our/consensus ~1.0mm estimate (in line with guidance), though 3Q guidance of +3.5mm member was below our 6.1mm estimate and our 4.5-5.0mm estimated investor expectation. The content production cycle continues to ramp post COVID disruptions and Netflix is further expanding both its global content offerings and pricing plans." Jefferies- Buy rating, $620 target "NFLX guided to 3.5MM paid net adds for 3Q, below our 5.75MM JEFe and the Street's 5.6MM est. Given the post market trading, we feel this was enough to keep investors from turning away completely, but will likely mean sideways trading until we get into the fall." UBS- Buy rating, $620 target "Netflix's 2Q results showed resiliency amid difficult COVID comps. ... We continue to believe Netflix is a LT secular winner with substantial scale, penetration upside and pricing power - all supporting higher margins and ramping FCF/sh - with optionality around franchise extension." Canaccord- Buy rating, $650 target "While subscriber growth volatility may impact near-term sentiment, we see Netflix as well positioned to increase its share of entertainment screen time given its robust investment in quality original content, improving cash flow profile, and global scale." Piper Sandler- Overweight rating, $600 target "While a mixed 2Q, sub gains likely improve from here along with the content slate. 4Q21 and 2022 should have a more familiar growth cadence. Meanwhile, little seems to have changed in the self-funding, content growth and longterm subscriber potential for NFLX." Loop- Buy rating, $650 target "We were expecting a subscriber miss and concerned that net additions could dip into negative territory. While this fear was misplaced and 2Q subscribers were slightly better, the 3Q sub guide was less than expected. But, overall we did not find much in the report that was terribly surprising."
In this photo illustration the Netflix logo in the App Store seen displayed on a smartphone screen.
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