Rosenblatt remains Neutral-rated on Netflix on mix of constructive/cautionary themes

  • Investing.com
Rosenblatt remains Neutral-rated on Netflix on mix of constructive/cautionary themes
Credit: © Reuters.

On Wednesday, Rosenblatt Securities sustained its Neutral rating and a $554.00 price target on Netflix (NASDAQ: NFLX ) shares, traded on the NASDAQ . The firm's stance comes ahead of the anticipated Netflix earnings report, with attention focusing on the company's subscriber growth—a key factor known to cause significant fluctuations in Netflix's stock price post-earnings announcements.

"We maintain a NEUTRAL rating, with a mix of cautionary and constructive themes and data points ahead of the earnings report," said the analyst.

The analyst from Rosenblatt highlighted the broad guidance for the first quarter of 2024, projecting a decrease in net subscriber additions from the 13.1 million gained in the fourth quarter of 2023, which brought the global total to 253.7 million. However, the expected additions would still represent an increase from the 1.751 million subscribers added in the first quarter of 2023. This range indicates that there could be considerable variances in the actual numbers.

Rosenblatt's own models predict 3.38 million net additions for Netflix in the first quarter, while the FactSet consensus estimates higher at 4.90 million. Historically, the first quarter has often seen higher subscriber growth than the fourth quarter, pre-pandemic. This trend has not continued post-pandemic, adding a layer of uncertainty to the projections.

InvestingPro Insights

As Netflix heads into its earnings report, investors are keenly observing its market performance and valuation metrics. According to InvestingPro data, Netflix's market capitalization stands at a robust $267.24 billion. The company's P/E ratio is high at 50.59, reflecting a premium valuation relative to near-term earnings growth. This is further underscored by a PEG ratio of 2.36 for the last twelve months as of Q1 2023, suggesting that investors may be expecting significant future earnings growth to justify the current price levels. The Price / Book ratio, another indicator of valuation, is also on the higher end at 12.98.

While the valuation metrics suggest a premium, Netflix's position as a prominent player in the Entertainment industry (InvestingPro Tip) cannot be overlooked. The company has also demonstrated strong returns over the last year, with an impressive 88.87% one-year price total return. This performance is in line with Rosenblatt's neutral stance, which recognizes the potential risks but also the company's positive indicators. For those interested in a deeper analysis, InvestingPro offers additional insights and metrics for Netflix, including 16 more InvestingPro Tips available at https://www.investing.com/pro/NFLX. To access these valuable insights, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.

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