Morgan Stanley issues blunt call on Netflix stock post earnings

Though it posted a comparatively decent quarter, cautious guidance took the radiance disconnected the report, starring to a dip successful banal price.

Morgan Stanley analysts, however, didn’t flinch and remained unwaveringly bullish connected the streaming giant’s stock.

The bank’s analysts reiterated their Overweight standing connected Netflix banal and maintained its $115 terms target.

Compared to Netflix’s $107.79 closing terms connected the study date, the terms people implied a 6.7% upside.

For perspective, the banal has pulled backmost sharply from its post-earnings level and is present trading conscionable beneath $100.

Netflix’s near-term troubles are evident successful its lukewarm guidance, but Morgan Stanley believes the semipermanent bull lawsuit is intact.

Pricing powerfulness remains healthy, retention levels person improved, and advertizing continues to scale, which lays the instauration for a compelling compunder.

Morgan Stanley bets that the post-earnings dip relates to the short-term a batch much than immoderate interruption successful Netflix’s compelling broader story.

• Netflix bushed connected sales, posting $12.25 billion, up 16% twelvemonth implicit year, topping estimates of $12.17 billion.

• Operating income jumped 18% to $4.08 billion, supra the $3.94 cardinal estimate, though 31.7% borderline missed the 32.5% forecast.

• Free currency travel skyrocketed to $5.1 cardinal from $2.7 cardinal a twelvemonth earlier, beating the $2.87 cardinal expectations.

• The absorption was connected Netflix’s anemic guidance, wherever the 2026 gross midpoint of $51.2 cardinal missed estimates of $51.38 billion, portion the 31.5% borderline trailed the 32% forecast.

• Shares slipped aft hours arsenic Netflix besides announced that Reed Hastings won’t question re-election arsenic chairman.
  Source: Seeking Alpha.

Morgan Stanley believes Netflix’s post-earnings dip has everything to bash with timing.

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Though Netflix posted a beardown Q1 top-line beat, the bigger contented was its Q2 guidance, which fell abbreviated of statement estimates.

However, Morgan Stanley analysts reason that this is mostly astir terms increases flowing done the concern alternatively of a request issue.

Netflix’s U.S. terms hikes volition instrumentality 2 to 3 months to commencement showing up meaningfully successful the numbers, truthful that the March bump mightiness person a bigger interaction successful Q3 than the second.