The Netflix stock price is soaring more than 18% today after a strong Q3 earnings report yesterday. We were bullish ahead of the Netflix earnings report and still think NFLX stock is a long-term buy even at today's high prices.
In early morning trading today (Tuesday), the Netflix Inc. (Nasdaq: NFLX) stock price was up 18.6% at $118.36 on very heavy volume.
Before we get into our Netflix stock price outlook, here's what you need to know about the Netflix earnings report...
Netflix Stock Price Skyrockets on Earnings
- After Monday's close, NFLX posted Q3 earnings per share (EPS) of $0.12. That was double Wall Street estimates of $0.06 and ahead of Netflix's forecast of $0.05.
- Revenue for the quarter came in at $2.29 billion. That was up 36% year over year. Consensus estimates were for revenue of $2.28 billion.
- U.S. subscriber growth for the quarter was 370,000. Analysts had expected 304,000, and Netflix had guidance of 300,000.
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- International subscriber growth came in at 3.2 million, blowing past Wall Street forecasts of 2 million.
- For Q4, Netflix expects domestic subscriber growth of 1.45 million versus Wall Street's forecasts of 1 million.
- International subscriber growth in Q4 is projected at 3.75 million compared to analysts' forecast of 3.1 million.
Subscriber growth and guidance are always the key metrics in every Netflix earnings report. And those numbers have the biggest impact on the Netflix stock price.
Many investors had been worrying that Netflix was reaching a saturation point in the United States. But Netflix showed it has plenty of room to grow both stateside and abroad.
And fueling that growth is Netflix's original content...
Why We're Bullish on the Netflix Stock Price
Netflix credited two cult hits, "Stranger Things" and season two of "Narcos" for subscriber growth in Q3.
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Looking ahead, Netflix plans to release an astounding 1,000 hours of original shows and movies in 2017. That's up from 600 hours in 2016. Netflix forecasts it will spend $6 billion on content next year, up from $5 billion this year.
Last week, Netflix signed a $40 million partnership with comedian Chris Rock for two new comedy specials.
And the company continues to boost its international offerings...
Netflix plans to license content to existing online service providers in China instead of operating its own service in the country. The company hopes to eventually launch its service in China, but noted that the regulatory environment for foreign digital service providers is "challenging."
In other countries, Netflix continues to add shows produced in local languages. Its first German series, "Dark," recently began production. "Club de Cuervos" in Mexico and "Marseille" in France have both been renewed for second seasons.
Following the results, a number of firms boosted their Netflix stock price targets:
- Pivotal Research increased its NFLX stock price target to $155 from $125, citing "powerful" Q3 results and guidance.
- Canaccord Genuity raised its NFLX stock price target to $140 from $115. The firm said Netflix is still just tapping international markets, and its content strategy will boost subscriber growth further.
- Stifel Research upped its NFLX stock price target to $140 from $120.
- Loop Capital hiked its NFLX stock price target to $133 from $125.
Money Morning has been bullish on NFLX stock throughout 2016. But given the stock's volatility, we believe shares are best suited for investors with some risk tolerance and a long-term outlook.
Today's price gains put the NFLX stock price up 3.16% year to date. Shares had been down more than 12% this year heading into earnings. Three- and five-year gains are 170% and 660%, respectively.
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