Netflix (NASDAQ:NFLX) had investors scratching their heads on Friday, as the stock was sliding ~5% despite the company delivering a pretty strong Q2 report.
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At first glance, the dip seemed hard to justify – Netflix beat expectations on the main numbers and delivered a solid outlook. Revenue was up 16% year-over-year, reaching $11.08 billion, just above Wall Street’s estimate. Earnings per share came in at $7.19, topping forecasts by $0.12.
Looking ahead, Netflix also offered a strong guide for the current quarter, calling for revenue of $11.53 billion, above the $11.28 billion analysts had expected. The company anticipates EPS of $6.87, also ahead of the $6.70 consensus estimate.
That’s the quarterly holy trinity – beats on the top line, bottom line, and guidance – but investor disappointment likely stems from sky-high expectations heading into the report. After all, the stock has been on a tremendous run, nearly doubling over the past year.
But although investors appear to feel somewhat let down by the readout, many Street analysts are lining up to applaud the company, with a slew of price target hikes. Among those singing Netflix’s praises is Morgan Stanley’s Benjamin Swinburne, an analyst ranked amongst the top 4% of Street stock experts.
Following the results, the 5-star analyst hailed the “strong 2Q results,” reiterated NFLX’s status as a Top Pick, and maintained an Overweight (i.e., Buy) rating on the shares. Swinburne also raised his price target from $1,450 to $1,500, implying the shares will gain 20% over the next year. (To watch Swinburne’s track record, click here)
“As Netflix delivers mid-teens revenue growth and margin expansion in ’25, it is investing in future growth with new ad tech, user interface, and GenAI tools,” Swinburne went on to say.
That last point is one the analyst thinks investors should pay particular attention to. Swinburne believes GenAI is set to move out of the background in Hollywood and take center stage, and Netflix is “well positioned to lead in GenAI innovation to drive its business.”
Two examples highlight GenAI’s growing impact. First, in the Netflix-coproduced series The Eternaut, GenAI-powered visual effects tools helped a small-budget production create a complex scene – a building collapse in Buenos Aires – that would have been financially out of reach using traditional methods. The director completed the VFX shot roughly ten times faster than with legacy tools. On the product side, Netflix is testing a natural language model that lets users explore its vast content library through simple conversation. Swinburne believes that these early use cases hint at the broader potential GenAI holds for the business over time.
Turning now to the rest of the Street, where NFLX stock claims an additional 26 Buys and 11 Holds, all coalescing to a Moderate Buy consensus rating. The average price target clocks in at $1,360 and change, making room for additional one-year gains of 12%. (See NFLX stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.