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Wall Street Screams ‘Buy the Dip’ Ahead of Netflix Earnings

Last Updated September 23, 2020 12:50 PM
Gerelyn Terzo
Last Updated September 23, 2020 12:50 PM

The earnings parade has begun, and so far the stock market is showing just a few jitters. All eyes are on the FANG stocks, including content streaming behemoth Netflix, which will be reporting second-quarter earnings later today. The stock has already ballooned by more than one-third year-to-date, but given the bullish performance of other growth stocks, Wall Street analysts say NFLX has more runway for gains.

netflix chart
NFLX stock is up nearly 40 percent year-to-date. | Source: Yahoo Finance

JPMorgan led the charge, with analyst  Doug Anmuth reportedly saying :

“NFLX remains one of our top picks, and while the competition/price increase-related churn ‘wall of worry’ could take a few quarters to disprove, we think it presents a good buying opportunity.”

That “wall of worry” the analyst is referring to has to do with companies like NBC, Disney, and AT&T poised to enter the streaming content fray as soon as this year. No doubt Netflix CEO Reed Hastings is set to address the latest competition, as it’s the latest quarterly earnings report since his rivals started fighting fire with fire.

Shows such as “Friends” and “The Office” all facing expiration dates at the content streaming pioneer. But if you ask media mogul Barry Diller, Netflix is too far in the lead for that to cause any real damage. The biggest threat, he suggests, is Disney given its “very, very popular content.” But even then, Diller wouldn’t lose any sleep over it.

Netflix’s First-Mover Advantage

Netflix has already disrupted the Hollywood industry. One advantage that it has that its new competitors don’t is a first-mover advantage in streaming. They’ve already amassed roughly 150 million subscribers and analysts say there is still an opportunity for “meaningful” growth. Barry Diller recently told CNBC :

“No one is going to compete with Netflix in gross subscribers. I believe they have won the game…There’s nothing I can see that’s going to dislodge them.”

Buy the Dip

JPMorgan isn’t the only Wall Street firm bullish on Netflix. Bank of America also issued a report, urging investors to treat any “dip” in the stock as a “buying opportunity.”

“We see most near term risks for Netflix as fleeting, with structural growth expected to hold.”

Netflix shares are trading relatively flat ahead of earnings, which are expected after the bell.