The shares of the television streaming company Netflix (NASDAQ: NFLX) They are rising again on Friday, extending a bull run for stocks in 2019. Stocks rose 27% so far this year, recovering some losses from a sharp fall in the second half of 2018.
The rise in shares on Friday comes after two analysts raised their price targets for shares, raising the standard for the broadcast television giant to enter its fourth-quarter earnings report next week.
What analysts say
"Dice [the stock’s] "The low performance in 2H18, compared to traditional media, we believe that the combination of positive reviews and emerging signs of long-term earnings potential will generate a superior performance in the stock price," said Justin Patterson, analyst Raymond James, in a note to customers (through CNBC). The list of contents and the company's ability to deliver movies in a convenient, cost-effective and global manner will be key drivers for the company in the coming years, Patterson explained.
Patterson improved Netflix's stock to outperform a strong purchase rating and gave shares a target price of $ 450 for 12 months, compared to $ 435. By highlighting the importance of this target price, it represents 32% up from the stock price of $ 340 of the share at the time of this writing on Friday.
Meanwhile, UBS analyst Eric Sheridan improved neutral stock to buy, giving shares a 12-month target price of $ 410 – above $ 400.
"With content spending now on a scale of leading media companies and titles that continue to demonstrate great success in the marketplace, we see the pitfall around the expansion of NFLX's global positioning and long-term secular winner status. term remain intact, "said Sheridan. In addition, Sheridan said that concerns about the expected compression of the company's margin and the negative challenges of free cash flow are now "better understood by investors and reflected in the current price of the shares."
The pressure is on
Of course, with such a strong performance of Netflix shares recently, pressure is on the rise for the company to enter its fourth quarter update on Thursday.
For its fourth quarter, Netflix expects revenues of $ 4.2 billion, an increase of approximately 28% over the same period of the previous year. However, profitability is expected to see the headwinds when the company's fourth quarter sees a higher mix of original films and more aggressive content spend. The administration was guided for a fourth quarter operating margin of 4.9%, a decrease of 7.5% in the fourth quarter of 2017. For quarterly earnings per share, management expects $ 0.23, less than $ 0.41 in the same quarter of the same quarter. last year.
The strong acquisition of members is expected to be a key factor for Netflix's revenue growth in its fourth quarter. The company is guiding 7.6 million new net paid members and 9.4 million new net members by including them in the free trials.
Several analysts have been recently updating Netflix shares, highlighting Street's positive opinion for the company. But it is safe to say that expectations are high after the uptrend of the stock recently. If any key metrics are lower than expected next week, the action could be affected.