The companies’ profits in the S&P 500 will likely increase for a fifth consecutive quarter as the consensus modeling earnings growth for the third quarter comes in at 4.1%. Among those reporting during this earnings season is one of the first high-profile communication services companies: Netflix, Inc.
(NASDAQ: NFLX), whose earnings are expected to dip after the market closes on Thursday Deepwater Asset Management’s Gene Munster discussed what he expects from the report in a post on X Monday.
Netflix Stock Rally: Munster, in a post, said that Netflix shares have gained 142% since the Magnificent 7 became the tech investing standard in Jan. 2023, and the stock is now near its all-time high. In comparison, the Magnificent Seven as a group has rallied 244%, though excluding Nvidia, the group’s gain is a more modest 140%, he noted.
Munster said the rebound witnessed over the past year is a function of the company’s success with the password crackdown that began in May 2023. The tech venture capitalist said this helped the company accelerate its growth from 4% in March 2023 to 17% in June 2024.
Consensus Call: The Street looks for Netflix to earn a share of $5.11 and a revenue of $9.764 billion, according to consensus estimates based on Benzinga Pro data. That compares to the year-ago earnings of $3.73 per share and revenue of $8.54 billion.
Comps get tougher starting in the September quarter, but Munster said the Street’s 14% growth forecast will prove slightly conservative. The tech analyst expects it to be even tougher in 2025, which would risk the current consensus forecast of 12% growth. The assumption is based on the belief that the core business growth rate, excluding the one-off benefits of the password crackdown and the launch of a new offering, is in the 5-10% range.
According to Munster, Netflix won’t likely provide any guidance for next year when it reports this week. “My biggest concern about owning Netflix is the opportunity cost,” he said. “While generative AI will undoubtedly reduce production costs and increase margins, the company’s exposure to the AI paradigm shift is modest compared to $GOOG, $META, $AAPL, $TSLA, $TSM, $MSFT,” he added.