Netflix (NASDAQ:NFLX) is gearing up to announce its fiscal first-quarter earnings after Thursday’s market close, but the streaming giant faces a tough challenge as investors grapple with sky-high expectations amidst a steep rise in the company’s valuation.
Deutsche Bank highlighted the precarious situation in a note on Monday, cautioning that the recent surge in Netflix’s stock price creates a tricky scenario heading into the earnings report. With shares up over 155% in the past 18 months and trading near the top end of their 52-week range, the bank suggested that meeting these elevated expectations would be crucial for further stock appreciation.
The focus will be on Netflix’s revenue strategies, including measures like cracking down on password sharing and introducing an ad-supported tier, alongside last year’s subscription price hikes. These initiatives are expected to drive metrics such as free cash flow, operating margins, and average revenue per member higher.
JPMorgan analyst Doug Anmuth, despite maintaining an optimistic view with a price target of $650 per share, warned of the inherent risks associated with elevated expectations and a lofty valuation. He projected first-quarter net subscriber additions of 6 million, surpassing consensus estimates, but noted that investor expectations could be even higher.
Oppenheimer also predicts that Netflix will outperform subscriber estimates, buoyed by sustained paid sharing and strong content offerings like “Avatar: The Last Airbender” and “Fool Me Once.”
Looking ahead, Macquarie analyst Tim Nollen emphasized the significance of Netflix’s ARM growth and the potential impact of its ad business, particularly in 2025. He maintained an Outperform rating and a $685 price target on Netflix shares, citing optimism for future revenue growth and expansion opportunities.
As Netflix navigates its earnings report, investors will closely monitor its ability to meet or exceed these high expectations while maintaining growth momentum in a competitive streaming landscape.
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