By Senad Karaahmetovic
Netflix (NASDAQ:NFLX) is due to report Q1 results next week and several analysts are out with their previews.
JPMorgan analysts are generally positive on Netflix shares, although they warn “there is a near-term risk to 2Q numbers as paid sharing likely rolls out more broadly during the quarter.”
“Just as there was initial subscriber pushback and bumpiness in recently launched markets such as Canada, we would expect similar friction across a larger set of markets, likely to include the U.S., Brazil, those in Western Europe, and many others,” they said in a client note.
They also argue that Netflix will “walk back its expectation for greater paid net adds in 2Q than 1Q as the bulk of the paid sharing rollout will likely now come in 2Q, a seasonally weak quarter w/fewer gross additions at the top of the funnel.”
As a result, JPMorgan analysts increased their Q1 net adds estimates to 3.25 million while Q2 net adds are lowered to 1M. Overall, the H1 net adds estimates are down to 4.25M from the prior 4.75M. For Q3, JPM sees 500,000 net adds while the FY23 forecast of 16M is unchanged.
According to the analysts, surveyed investors are expecting 4-5M net adds in the first half of the year.
“Our overall numbers for 2023 are largely unchanged and we continue to view the paid sharing rollout--in conjunction with advertising--as a major part of the near-term bull thesis to expand NFLX’s SAM,” the analysts concluded.
They rate Netflix as Overweight, with a $390 per share price target.