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Some analysts turn on Netflix ahead of today's second-quarter results

Last updated: 19:52 16 Jul 2018 BST, First published: 17:31 16 Jul 2018 BST

Netflix display on tablet
Consensus estimate is for Netflix to earn US$0.79 per share on revenue of US$3.94bn in the second quarter

After seeing its share price fly by as much as 115% so far this year, Netflix Inc (NASDAQ:NFLX) could face a comeuppance when it reports its second-quarter results after the bell today.

Indeed, some Wall Street analysts are adopting a decidedly more cautious outlook on the popular web streaming service on the view that optimism about the company has been priced into the stock.

Ahead of tonight’s earnings, Matthew Harrigan of Buckingham Research downgraded Netflix to Underperform from Neutral, despite raising his price target on the stock to US$333 from US$301.

Harrigan estimates that Netflix’s current price implies "optimistic" views of the company reaching 360 million members in 2025 and 505 million by 2033 along with a long-term operating profit margin near 35%.

Read: Netflix trials new ‘Ultra’ subscription plan in Europe

Indeed, Harrigan worries that Netflix will lose considerable outside content as more players in the TV industry compete directly when it comes to the business of content delivery.

“International competitive intensity is increasing, while pricing power is limited in high growth and especially competitive middle-income markets,” writes Harrigan in a note to investors.

“As TV goes all IP-delivery globally and Netflix soon loses much outside content it will have to increasingly differentiate itself through in-house production as its user experience advantage erodes,” he adds.

Mark May, a Citi analyst, is also growing more cautious on the web-streaming services’ near-term prospects and projects its outlook for the third-quarter could fall below expectations, according to a note first seen by the business news site TheFly.com. May has a Neutral rating on the shares,

May has questions about the influence of the jump in the US dollar’s value and related fluctuations in the company’s currency benefit, which resulted in a gain of 440 basis points in the first quarter.

Read: Netflix to raise another US$1.5bn in debt as it dials up content spending

The bearish calls may be growing louder, but some analysts’ enthusiasm for Netflix remains strong.

Douglas Mitchelson, an analyst with Credit Suisse, calls the quarterly expectations for the company “reasonable,” according to a note seen by TheFly.com.  He says the key for the stock’s earnings report are the additions it will see to its subscribers and is reiterating an Outperform rating and US$500 price target on the shares.

RBC Capital's Mark Mahaney is also sticking to his Outperform rating and a $360 price target, stating that Netflix "achieved a level of sustainable scale, growth, and profitability that isn't currently reflected in its stock price", according to a note first seen by TheFly.com. He does, however, hold some concerns about the impact of foreign currency exchange fluctuations in the second quarter.

The consensus estimate among Wall Street analysts is that Netflix will earn US$0.79 per share on revenue of US$3.94bn in the second quarter.

Netflix shares held steady in early afternoon trade at US$398.40.

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