Subscription streaming video giant Netflix has a positive setup heading into its second-quarter earnings report. But some analysts are uneasy about the rich valuation for Netflix stock.
The Los Gatos, Calif.-based company is set to report Q2 results late Thursday. Analysts polled by FactSet expect Netflix to earn $7.07 a share, up 45% year over year, on sales of $11.04 billion, up 15.5%.
Key focus areas for the Q2 report will be the company's progress in scaling its advertising-supported service tier and growing its international business. Analysts also will be curious to learn more about Netflix's live programming initiatives, including sports and its deal to carry the TF1 channels in France.
However, sentiment on Netflix stock is mixed ahead of the company's report.
On Friday, four Wall Street firms raised their price targets on Netflix stock. Of those, three have buy ratings on the stock — Evercore ISI, Needham and Piper Sandler — and one is neutral, JPMorgan.
Earlier this week, Netflix stock scored price-target hikes from one firm with a buy rating, KeyBanc, and another with a neutral rating, Barclays. However, on Sunday, Seaport Research lowered its rating on Netflix stock to neutral from buy.
Given the varied takes on Netflix, shares of the internet television network have pulled back recently.
On June 30, Netflix stock notched a record high of 1,341.15. But on the stock market today, Netflix stock slid 0.4% to close at 1,245.11.
Needham analyst Laura Martin remains bullish on Netflix stock. She reiterated her buy rating and raised her price target to 1,500 from 1,126.
Martin likes the company's global scale and ability to raise prices with minimal subscriber churn.
Netflix Stock Is On Three IBD Lists
Piper Sandler analyst Thomas Champion kept his overweight rating on Netflix stock and upped his price target to 1,400 from 1,150. He noted that "valuation is a fair pushback."
On the programming front, Netflix is basking in the success of the third and final season of hit show "Squid Game." Coming soon are new seasons of "Wednesday" and "Stranger Things."
For the third quarter, Wall Street is modeling Netflix to earn $6.67 a share, up 24% year over year, on sales of $11.26 billion, up 15%.
Emarketer analyst Paul Verna said Netflix has a "high bar" to clear with its Q2 earnings report, given its winning streak.
"By now, there's no question that Netflix is the undisputed leader in premium streaming, so Wall Street will be more focused on how it continues to scale its business than on whether it's winning the streaming wars. (Spoiler alert: it is.)," Verna said in a client note.
Netflix stock is on three IBD lists: IBD 50, Leaderboard and Big Cap 20.
Follow Patrick Seitz on X at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
