Netflix will surge 32% to record highs as app-download data points to strong subscriber growth, Goldman says

• Strong app-download trends suggest Netflix is on the verge of releasing a blockbuster second-quarter earnings report, according to Goldman Sachs.
• In a note published on Friday, Goldman raised its Netflix price target to $670, representing upside potential of 32% from Thursday's close.
• The firm said that as the COVID-19 pandemic continues to accelerate movement toward streaming services, Netflix is a prime beneficiary.
• Goldman said it thought Netflix could add at least 12.5 million net paid subscribers in the second quarter, which would be well ahead of Netflix's guidance of 7.5 million.
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Strong app-download trends suggest that Netflix could blow past net-subscriber-addition estimates when it reports second-quarter earnings next week, according to Goldman Sachs.

In a note published on Friday, Goldman raised its Netflix price target to $670, representing upside potential of 32% from Thursday's close.

Goldman said Netflix was poised to report 12.5 million net subscriber additions for the second quarter, which would blow past Netflix's guidance of 7.5 million and an analyst consensus of 8.2 million.

The firm justified the sky-high estimate with data from SensorTower indicating that the Netflix app experienced a record in quarterly downloads and that year-over-year download growth reached its highest level since the first quarter of 2016.

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Goldman dismissed the common bearish Netflix thesis "if you haven't subscribed by now, you never will." The firm said Netflix was benefiting from an acceleration of the streaming trend driven by the COVID-19 pandemic, adding that very few streaming services could compete with the sheer scale of its ad-free content library.

The firm said it believes investors continue to underestimate Netflix's "global addressable market, the impact of incremental content spending, Netflix's growing value to both distributors and content creators, the weakening competitive landscape, and the acceleration of the global adoption curve in the current environment."

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Goldman pointed to new content in the quarter that may have helped draw in new subscribers, including new seasons of "Money Heist," "13 Reasons Why," and "Dead to Me."

Additionally, the firm said Netflix could report positive free cash flow of $99 million for the quarter as content spending dries up because of the practical shutdown of filming for TV shows and movies during the pandemic.

Shares of Netflix surged as much as 3% to record highs on Friday. Netflix is up 61% year-to-date.

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