After rising from $194.85 to an all-time high of $423.15 in late June, Netflix shares were in for a tough end to 2018. A very poorly received second quarter update in mid-July left the stock in a bad way, while the gains made following its Q3 statement in October didn’t last long.
By the year’s close, the streaming juggernaut was at $256.15, a 37% drop from its summer peak (though still, interestingly, a 37% increase on its 2018 open). It has, however, rallied hard since the start of 2019, with Netflix shares now at a current trading price of $330.73.
Third quarter rally
As mentioned, October’s third quarter update did initially spark quite the rally, with shares shooting up 16% in a single session. While revenue was merely in line with expectations – though a 34% surge to just shy of $4 billion is certainly nothing to sniff at – it knocked its other metrics out of the park. Diluted earnings were 89 cents per share against the 68 cents forecast, with subscriber additions at a very healthy 6.96 million, substantially higher than the 5.13 million estimated.
And Netflix is expecting big things subscriber-wise from Q4, with the company stating back in October it is looking for 9.4 million net additions across the quarter. It is slightly less ambitious elsewhere, however, with revenue set to rise 27.8% to nearly $4.2 billion, and earnings per share at just 23 cents.
Given the sharpness of its rebound since the year began, the company really needs to pair meeting those estimates with a decent set of forecasts for its first quarter.
Netflix shares have a consensus rating of ‘Buy’ alongside an average target price of $367.41.
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