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Netflix Download Data Suggests 'Top And Bottom Line Outperformance' Due To Social Distancing

Wayne Duggan

Unlike many other stocks, Netflix Inc (NASDAQ: NFLX) has a business model that is relatively insulated from the impact of the COVID-19 outbreak.

On Thursday, another analyst said Netflix’s numbers may actually be benefiting from the rising number of Americans working from home.

The Netflix Analyst

BofA Securities analyst Nat Schindler reiterated his Buy rating and $426 price target for Netflix.

The Netflix Thesis

Schindler said Netflix subscriber growth should beat expectations to the upside in the first half of 2020. At the same time, the company’s margins should get at least a temporary boost due to reductions in costs related to reduced marketing spend and the shutdown of TV and movie production.

App download data suggests 7% growth in app downloads so far in the first quarter. Schindler anticipates a rise in Netflix engagement due to social distancing will translate to subscriber additions and retention. However, he said a U.S. recession will reduce the opportunity for price increases in the near-term.

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Schindler said investors should expect Netflix to beat top-line and botton-line expectations in the first quarter as stay-at-home orders around the world have accelerated Netflix’s adoption and engagement.

“We expect this could support long-term penetration and growth rates, though elect to leave estimates unchanged amid uncertainty around the virus outbreak’s economic impact and duration,” Schindler wrote in a note.

Benzinga’s Take

BofA Securities data suggests social distancing is boosting Netflix’s subscriber growth for now. However, investors should monitor the situation to see if the economic downturn increases subscriber churn as the outbreak drags on.

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Latest Ratings for NFLX

Date Firm Action From To
Mar 2020 Baird Upgrades Neutral Outperform
Mar 2020 Imperial Capital Maintains Outperform
Jan 2020 Citigroup Maintains Neutral

View More Analyst Ratings for NFLX
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