In contrast to the havoc wreaked by the coronavirus on many parts of the economy, Wall Street will be keen to gauge the extent of its positive impact on Netflix (NFLX) when the streaming giant reports 2Q earnings next Thursday.
No doubt, Netflix has been one of the companies to benefit the most from the pandemic. The stay at home measures, according to market research firm Nielsen, resulted in streaming figures more than doubling during the pandemic’s peak in comparison to the same period last year. Accordingly, Netflix’ market performance has reflected the real-world activity, with shares up by 52% year-to-date.
After Q1’s record breaking subscription numbers, Canaccord analyst Maria Ripps expects Netflix to post another strong report. Along with the secular tailwinds blowing at its back, the 5-star analyst points out the simple reason why she thinks Netflix will keep on outperforming.
“Analysis of our proprietary Netflix content power rankings highlights continued momentum in original content: As subscribers around the world spent more time at home during Q2 due to the pandemic, and amid continued competitive intensity, the importance of Netflix's content slate has arguably gone up. It seemingly delivered, creating a consistent stream of interest and buzz around original titles,” Maria wrote.
You can count the roaring success of Tiger King, crime drama Ozark, dating reality series Too Hot to Handle, and Michael Jordan docuseries the Last Dance among the titles which have kept sofa bound consumers tuned into Netflix. Add to that children content which got a meaningful boost during schools’ closures and a sizeable library of reality TV shows and docuseries, “with the two genres representing over 20% of the top 10 most popular TV series during Q2,” and you get Ripps’ point.
And while others have pointed out the disruption to production schedules wrought by the pandemic will have an impact further down the line, Ripps puts a positive spin on this, too. As Netflix has ownership on one of the biggest content libraries among streaming services, it has an advantage over competitors. Moreover, with various projects in post-production, content hungry users should remain well-fed for the foreseeable future.
Ripps, accordingly, reiterates a Buy on Netflix shares along with a $550 price target. What’s in it for investors? Potential upside of 11.5%. (To watch Ripps’ track record, click here)
All in all, Netflix has a Moderate Buy consensus rating based on 22 Buy ratings, 9 Holds and 4 Sells. However, some analysts feel Netflix has soared enough for now, as the average price target is $470.87, and implies shares will decline 4% from current levels. (See Netflix stock analysis on TipRanks)
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