Ahead of its upcoming earnings report, Morgan Stanley analyst Benjamin Swinburne reiterated his Overweight rating on Netflix, though he trimmed his price target to $450 from $480 to account for foreign exchange impacts, higher rates and higher marketing spending. However, he believes its ramping global production is helping Netflix continue to separate itself from competition, Swinburne tells investors. His Q3 subscriber expectations are in line with guidance for the addition of 650,000 members in the U.S. and 4.35M internationally, Swinburne noted. For Q4, he forecasts 1.8M U.S. net adds and 5.75M internationally.

Netflix said in its quarterly letter to investors: "We have built a hard to replicate combination of a strong slate, superior recommendations, broad reach and intense fandom, which drives healthy engagement on Netflix. Improvement in these key areas is the best way to delight our members and continue to grow our business." The company added: "Net cash generated by operating activities in Q1 was $2.2B and free cash flow totaled $2.1B (both flat with Q1'23). During the quarter, we paid down $400M of senior notes with cash on hand and we repurchased 3.6M shares for $2B. We finished the quarter with gross debt of $14B and cash and cash equivalents of $7B. We're still forecasting full year 2024 free cash flow of approximately $6B, assuming no material swings in F/X, and cash content spend of up to $17B."

Pre-earnings options volume in Netflix is 1.1x normal with calls leading puts 5:4. Implied volatility suggests the market is anticipating a move near 7.3%, or $44.89, after results are released. Median move over the past eight quarters is 9.6%.

Netflix (NFLX) is scheduled to report its first quarter 2024 financial results and business outlook on Thursday, April 18. A video interview... To see the rest of the story go to thefly.com. See Story Here