Netflix, Inc. (Nasdaq: NFLX) stock is down more than 11 percent since reporting a subscriber miss in the second quarter. However, third-quarter subscriber tracking suggests Netflix could get back on track with a big subscriber beat in the third quarter.
According to SunTrust Robinson Humphrey analyst Matthew Thornton, his firm’s subscriber tracker indicates that, through the end of August, Netflix is on track to add at least 5 million international subscribers in the third quarter. That growth is roughly 600,000 subscribers ahead of consensus analyst estimates of 4.4 million. In addition, SunTrust’s tracker suggests 700,000 domestic subscriber additions, in-line with consensus estimates.
Thornton says Netflix’s numbers have been driven by new original content released in August, including a new season of “Orange Is The New Black.” “Sacred Games,” and “Ghoul” also likely boosted India subscriptions, a key international growth market for Netflix.
After Netflix’s second-quarter bump in the road, Thornton says he expects the streaming video leader to get back on track in the second half of 2018. The company should also benefit from new distribution and promotion partners over the next two quarters, including KDDI in Japan, Airtel in India and Comcast Corp. (CMCSA) in the U.S.
If SunTrust’s projections are correct, Netflix could be putting together a huge third quarter, and Thornton says the fourth quarter looks solid as well.
“We continue to view (unchanged from last month) consensus expectation for International sub adds as reasonable and for domestic [subscription additions] as reasonable but not a low hurdle,” Thornton says.
Historically speaking, Netflix has not reported back-to-back quarterly subscriber misses since 2012, and Thornton says he does not expect that trend to change in the third quarter. In the longer term, he says India remains the key to Netflix’s international growth strategy, and early indications suggest that original content is catching on with the Indian audience.
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