Ahead of Netflix's (NASDAQ:NFLX) earnings release after the close on Wednesday, October 18, analysts at JPMorgan and Citi released notes previewing the report.
Analysts at JPMorgan told investors in a note that the focus will be on the paid sharing progress, ad scale average revenue per membership (ARM) into Q4 and 2024, and operating margin trajectory.
"We remain positive on NFLX overall, but we recognize there is a growing list of questions into 3Q earnings w/the Street looking for more clarity around recent conference comments, ad business leadership changes, and whether a softer margin trajectory is coming from a position of competitive strength or slower growth (or both)," the analysts said, who maintained a Buy rating and $455 price target on the stock.
The firm estimates NFLX will have cumulative borrower monetization of 18 million by the end of 2023, 30 million by the end of 2024, and 37 million by the end of 2025. In addition, they estimate 10 million ad tier subscribers at the end of 2023, "which would mean 20M+ MAUs/viewers, which could prove optimistic."
Analysts at Citi, who maintained a Buy rating and $500 price target on the stock, said the set-up has three facets.
"First, the good news: Netflix continues to take share of video viewing and the ad tier still has significant upside potential. Second, the neutral news: We expect Netflix to report results in line with the Street on all key metrics. Third, the bad news: consensus estimates for 4Q23 and 2024 may need to come down for revenues and margins," the analysts explained.
"To us, this suggests bearish tactical positioning may be reasonable. But, once sell-side estimates get reset, we believe Netflix remains a compelling Buy as rivals increase pricing and moderate content spending opening up a window for Netflix to distance itself from rivals," they added.