Why We're Bullish on the Netflix Stock Price After Earnings

Netflix stock price

The Netflix stock price is in focus today (Monday) as the company prepares to report third-quarter results after the close. We've been bullish on the Netflix Inc. (Nasdaq: NFLX) stock price for months and remain bullish.

But we are prepared for volatility...

The Netflix stock price is historically volatile after earnings reports. NFLX shares sank 15% last quarter despite easily beating EPS estimates. But subscriber count and outlook disappointed, so the Netflix stock price tanked.

So, we have always taken a long-term outlook on the stock.

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Before we get into our recommendation on the Netflix stock price, here are some key details expected from the streaming media giant's Q3 2016 results.

  • Netflix is expected to post earnings per share (EPS) of $0.06.
  • Revenue is expected to come in at $2.28 billion, up 31% year over year (YOY).
  • Domestic streaming revenue is expected to be $1.307 billion, up 23% YOY.
  • International streaming revenue is expected to come in at $845.9 million, up 64% YOY.
  • For the third quarter, Netflix said it expects to add 2 million subscribers internationally.

As always, subscriber growth is the focus. Some analysts worry that Netflix is reaching a saturation point in its domestic market and needs strong international expansion for growth. Netflix is addressing those concerns with new and original content, as well as strategic alliances.

And those are some of the biggest reasons we remain bullish on the Netflix stock price today...

Why We Remain Bullish on the Netflix Stock Price Today

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 Netflix continues to benefit from strong content.

Last week, Netflix confirmed that filming of a new original series created and directed by acclaimed filmmaker Manolo Caro will begin in Mexico early next year. The untitled Manolo Caro project will be available across all 190 Netflix territories.

Friday, Netflix inked a $40 million deal with comedian Chris Rock for two new stand-up comedy specials.

Amazon.com Inc. (Nasdaq: AMZN), Hulu, and HBO, where Rock has a long history with his late-night series "The Chris Rock Show," were also bidding for the specials.

In early October, Netflix signed a deal with luxury theater chain iPic Entertainment to simultaneously screen its original movies in theaters the same day that they appear on the streaming service.

Netflix movies will be shown in iPic theaters in Los Angeles and New York City this year, with the option of showing at iPic's 13 other locations or independent theaters. Netflix has shown its movies concurrently in theaters before, but the iPic deal represents its first long-term commitment with an exhibitor.

While Netflix is no longer a young company, it remains in growth mode. And that's the biggest reason we're bullish on the Netflix stock price.

Money Morning Director of Tech & Venture Capital Michael A. Robinson said back in October 2015 that Netflix is indeed still aggressively growing.

"It's the Bezos model - build, build, build - then the profits will follow," Robinson said.

Netflix shares surged early last month on takeover speculation. Walt Disney Co. (NYSE: DIS) and Apple Inc. (Nasdaq: AAPL) are rumored to be interested in Netflix.

A deal may or may not happen. Whether there is a buyout or not, we like Netflix for its prospects as a standalone. Others share a similar sentiment.

The median analyst rating on Netflix stock is "Overweight," with a $110 price target. JPMorgan recently raised its NFLX stock price target to $125 from $116. The Netflix stock price closed last week at $101.47.

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