‘You want to own this stock ahead of earnings,’ Netflix analyst says

Netflix CEO Reed Hastings

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Netflix CEO Reed Hastings
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  • Netflix could be a good stock to own before just before earnings, analyst Craig Huber of Huber Research Partners told Business Insider.
  • The video-streaming giant reports second-quarter earnings Monday.
  • Netflix has beaten analyst expectations consistently this year, and could do so again. Its stock is up by more than 100% this year.
  • Watch Netflix trade in real time here.

Netflix has crushed the broader market this year, as high expectations for the streaming-giant’s future have propelled its stock to new heights.

The stock has surged 108% this year, far outpacing the tech-heavy Nasdaq 100‘s 15.5% rally.

Investors are now wondering what’s next. Netflix reports second-quarter earnings Monday, and Craig Huber, the founder and CEO of Huber Research Partners, told Business Insider “you want to own the stock ahead of earnings.”

Perhaps one of the most interesting questions surrounding the stock is how much higher it can go. It reached a record high in late June of more than $400 a share, once touching a price-to-earnings ratio of 249, on strong expectations for the largely untapped international video-streaming market. Many on Wall Street believe Netflix is set to dominate the international market, just as it has the US market.

The company is not without its skeptics. Most recently, UBS analyst Eric Sheridan said in a note that the stock can’t possibly go much higher because Netflix’s international growth is “all priced in.”

However, Huber pointed to a few factors that could very well drive the stock higher.

Firstly, Netflix has beat on earnings consistently this year, and could definitely do so again. When asked what the chances are that Netflix beats Wall Street’s estimates this quarter, Huber said they are “very high.” In Netflix’s Q4 2017 earnings released in January, it reported 6.36 million net international-subscriber additions, beating estimates for 5.05 million. In the first quarter of 2018, Netflix added 5.46 million international subs, beating expectations for 4.98 million.

Revenues and earnings have been either in line or better than estimates this year.

Huber is expecting 5.2 million more international subscribers in Monday’s second-quarter report, which he said is “quite impressive and likely will be conservative.” He also thinks international subs growth “is going to come in better than guidance,” which Netflix said in the first-quarter should be 5 million.

But Netflix executives, Huber said, “tend be a little conservative.” What’s even more encouraging for Netflix investors is that “when they miss on the downside, it’s very slight,” Huber said.

Still, the stock has soared, and Huber has no problem with investors who choose to be very prudent.

“In terms of the timing of the stock, there’s nothing wrong with someone wanting to be more choosy on the price of the stock,” he said. “No question the stock is expensive on near-term estimates.”

Wall Street analysts surveyed by Bloomberg are expecting earnings of $0.79 a share on revenue of $3.94 billion.

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