Is the Netflix stock a buy or sell ahead of its Q2 earnings?

on Jul 15, 2021
  • Netflix stock jumped on Thursday after a bullish call by UBS.
  • UBS analysts expect the stock will rise to $620 as subscriber growth returns.
  • Netflix will publish its quarterly results on Tuesday next week.

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The Netflix (NASDAQ: NFLX) stock price rose by more than 2% in premarket trading after the company received a positive upgrade from UBS. The stock rose to $558 after it closed at $547 on Wednesday. This brings its total market capitalization to more than $242 billion.

UBS upgrades Netflix

Netflix stock has had a strong recovery in the past few weeks. The shares have risen by more than 15% from their lowest level in May. They have fallen by more than 6% this year.

This price action is mostly because of the overall perception that the company will see slower growth in 2021 as more people return to the offices. This view was reinforced in the company’s last quarterly earnings in April. In them, the firm said that it added less than 4 million new members, which was lower than the median estimate of 10 million. The company also warned of a dramatic decline in the number of new users later this year.

Analysts at UBS believe that this trend is set to change in the second half of the year. The company said this as it upgraded the Netflix stock price target to $620, which is about 13% above Wednesday’s close. The analysts also cited hints that the company was planning to introduce game streaming on its platform. This will be in its bid to compete with other game streaming companies like Twitch.

UBS are not the only analysts positive on the Netflix stock. Those at Edward Jones expect that the stock will rise while those at Credit Suisse expect it to rise to $586. Similarly, analysts at Wells Fargo and Jefferies expect the shares to keep rising.

Is NFLX stock a buy?

The next catalyst for NFLX stock will be the company’s earnings that will come out on July 20th. Analysts expect that the company’s revenue for the quarter rose to more than $7.32 billion from the first quarter’s $7.16 billion. They also see the firm’s EPS falling from $3.75 in the first quarter to $3.15 in Q2. Netflix has beat Wall Street estimates in the past six straight quarters. 

The most important number in the company’s earnings will be subscriber additions. In a recent note, analysts at Keybanc said that they expect that the company will miss on subscriber growth in these results. They still reiterated their forecast for the stock to $650.

Netflix stock price forecast

Netflix stock price
Netflix stock price

The two-hour chart shows that the Netflix stock price has been in a bullish trend lately. It has already risen above the important resistance level at $510, which was the highest point on May 28. It is also above the 25-period and 50-period moving average (MA). The shares have also formed a widening channel pattern. Therefore, there is a possibility that the stock will soar above $600 ahead of earnings.