Investing.com — Netflix Inc (NASDAQ:) will enter earnings next week against a backdrop of high expectations, but JPMorgan believes the streaming giant can deliver a few upside surprises, supported by an impressive content lineup, price gains and continued benefits from efforts to tackle password sharing.
“We remain positive on Netflix shares heading into second-quarter earnings on Thursday, July 18, while also recognizing high expectations,” JPMorgan said in a Friday note, raising its price target on the stock to $750 from $650.
Looking at Netflix’s earnings, scheduled for July 18, the company has already projected a lower net addition for the second quarter than the 9.3 million reported in the first quarter. But recent industry data indicates rising demand, JPMorgan said, citing Sensor Tower data showing global download and daily active user trends improved in the second quarter.
Analysts at JPMorgan have increased their forecast for second quarter net additions from 5.0 million to 6.0 million, predicting an increase in the second half of the year to 6.5 million in the third quarter and 8.5 million in the fourth quarter, bringing 2024 net additions to 30 million.
The more optimistic view on Netflix comes as content in the second quarter, including expanded sports and event content such as Jake Paul Vs Mike Tyson, Xmas Day NFL Games and Chestnut vs. Kobayashi: Unfinished Beef, “should increase engagement from NFLX’s large global subscriber base and attract more advertising dollars,” the analysts said.
JPMorgan left its 2024 Netflix revenue growth forecast unchanged at 18.8%, but now sees the streaming giant’s 2024 margins and free cash flows up about 1% at 25.2% and $6.5 billion.
While that’s slightly better than Netflix’s 2024 expectations of 13% to 15% revenue growth, 25% OI margins and $6 billion FCF, these numbers could each “prove conservative” according to JPMorgan as the strong subscriber growth, price increases, and cost discipline could deliver upside surprises.
Netflix shares are up 19% from their April lows and have beaten the Netflix index’s 11% gain in that period, putting the stock within 6% of all-time highs.
