Can Netflix get its Mojo back?
That's the question investors of Netflix (NFLX) have as the streaming giant prepares to launch the tech earnings season on Tuesday.
The prognosis is mixed. The streaming giant's stock has been in a relative slump since July earnings, with new subscriber growth not meeting Wall Street expectations. Investors did not forgive the missed target and the stock never fully recovered: equities traded more than 15% less than before the July report.
Two analysts also lowered their 12-month stock price on Monday Both analysts at Goldman Sachs and Raymond James point to rising interest rates as a factor that could lead to slower growth in Netflix valuation. Netflix shares fell 6% on a broader selloff sale last week, partially due to interest rates.
Goldman Sachs' Heath Terry pointed to positive catalysts in a note to customers, but lowered the Bank's price target from $ 470 to $ 430 "to reflect the contraction in broader Internet multipliers," suggesting that rising interest rates were "more important for price performance."
With investors watching Tuesday's Netflix results Tuesday, subscriber growth, international expansion and spending will likely be some of the topics that are likely to be highlighted. In July, Netflix added 5 million net subscribers in the third quarter, totaling 650,000 in the US and 4.35 million in international markets. New subscribers in the international markets are of particular interest as US subscriber growth slowed compared to other markets.
As Mark Kelley of Nomura points out, the competitive environment for Netflix is one of the biggest overarching issues around the stock. Competitors such as AT & T (T), Apple (AAPL), Walmart (WMT), and even Costco (COST) are preparing to enter the video streaming space, which adds up to the cost of acquiring or producing original content could. "While these services offer different direct threats to Netflix subscribers, they point out that the arms race for content is unlikely to weaken in the foreseeable future," Kelley wrote.
However, it is not all mischief.
Netflix lost subscribers in the last quarter, partly due to weak Q2 original offerings, but stronger content released in the last quarter could also have brought Netflix more subscribers in the last quarter.
"We note that the content that went online during the third quarter was better than the second, including new seasons from big series like Orange, New Black, Ozark and BoJack Horseman, giving us more confidence in the company gives can reach its 3Q subscriber lead, "added Kelley. "In addition, the latest download data for the Sensor Tower app has shown strong international growth, with India being the fastest growing region in the world."
Netflix announces its results after the close on Tuesday.
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