Credit Suisse Says Netflix Earnings are Likely to Disappoint

Streaming giant Netflix is expected to report its third quarter earnings on October 16th and one bank is already expecting bad results.

Swiss investment bank and financial services company Credit Suisse has projected that Netflix’s upcoming earnings are going to be a disappointment.

Credit Suisse analyst Douglas Mitchelson has cut its forecast for Netflix’s third-quarter earnings to “in line-to-below guidance” from “in line-to-ahead of guidance.”

Mitchelson has cited soft app downloads in recent weeks and an odd decline in India for the cut.

“While July and the first few weeks of August looked like Netflix subscriber growth trends had rebounded from 2Q based on our analysis of Sensor Tower first time Netflix app downloads globally, the last 3 weeks (through September 16th) have been relatively soft,” said Mitchelson.

Credit Suisse said Netflix’s global app downloads were up 20% in the third quarter three weeks ago, but now they are only up 6% year over tear.

The analyst also noted a 1% decline in India “oddly” despite the launch of mobile in the region this quarter and a strong local content release slate.

It was in July that Netflix had said that it had a rare loss in U.S. subscribers and a large miss in international subscribers for the second quarter. It was also this week that shares of the streaming giant turned negative for the year.

Of 39 analysts covering Netflix, 28 have a buy rating, nine recommend holding the stock while two have a sell ratings, according to FactSet.

Barclays recently estimated that Netflix’s current valuation includes having 750 million to 1.3 billion subscribers by the time it reaches its “end state” in 2026.

“Overall, our methodology does suggest that if Netflix’s present business model is held constant, the stock is very expensive relative to its TAM,” Barclays analyst Kannan Venkateshwar wrote, referring to total addressable market.

Disclaimer: We have no position in Netflix Inc. (NASDAQ: NFLX) and have not been compensated for this article.