Netflix shares head north as Q2 results, outlook offer 'light relief'
Wachiwit

Netflix (NASDAQ:NFLX) shares rose as much as 5% in pre-market trading Wednesday after the streaming TV giant posted second-quarter results and issued third-quarter guidance that were both better-than-expected.
The results and outlook prompted analysts to suggest that the company's subscriber losses may be stabilizing. 
Credit Suisse analyst Douglas Mitchelson, who has a neutral rating on Netflix's (NFLX) shares, said that the company's that the second-quarter loss of 970,000 subscribers was better than expected. With guidance that it could add 1M subscribers in the third-quarter, Mitchelson said uncertainty around Netflix (NFLX) is still "elevated" but there is light at the end of the tunnel.
Mitchelson said that with Netflix's (NFLX) subscriber growth stalling as the Covid-19 pandemic abates, the company's focus on options such as charging for password sharing and launching lower-priced ad tiers in early 2023 in major markets, "holds some promise," but it will take until next year or perhaps 2024 to see results pan out.
Mitchelson lowered his price target to $263 a share from $360 following the results.
Macquarie analyst Tim Nollen said the Netflix (NFLX) results offered a "little light relief," even as he cut earnings estimates.
"Some stability in subs is good, and [management's] tone sounded much more reassured this time than the last two," Nollen said in ar research note. "So, [Netflix] stock could enjoy a short relief rally." However, Nollen added "there is still some way to go to turn numbers around" and at this point, it's uncertain what the effect of a potential recession could be on subscribers.
Nollen lowered his 2022 earnings estimates on Netflix (NFLX) to $9.29 a share from $10.11, and cut his 2023 forecast to a profit of $9.07 a share from $10.28.
On the the company's earnings call, Co-Chief Executive Reed Hastings said there was no mistaking what was the biggest factor impacting Netflix (NFLX) during the second quarter of the year.
"If there was a single thing, we might say Stranger Things," said Hastings. "We're executing really well on the content side."
Deutsche Bank analyst Bryan Kraft, who has a hold rating on Netflix (NFLX), noted there were "some positive developments" in the second-quarter results and conference call, including the fact that cash content spend would moderate and there would be "significant growth" in free cash flow.
However, there were a few negatives as well, including the fact that subscriber growth is still historically weak and the plans to boost revenue -- charging for account sharing and an advertising-supported plan -- are not likely to yield short-term results.
"We will be looking for signs that Netflix's plan to reaccelerate subscriber and revenue growth is working next year as the company begins to roll out its account-sharing and advertising initiatives," Kraft explained.
On Tuesday, Netflix (NFLX) said that the advertising-supported option would likely come to market "around the early part of 2023" and be launched in a "handful of markets where advertising spend is significant."