Netflix share price: Q3 earnings preview
Netflix will need to exceed seven million net subscribers in Q3 2019 to appease investor sentiment ahead of the Disney+ and Apple TV+ launch next month
When is Netflix earnings date?
Netflix Inc, the Nasdaq-listed, world-leading internet television network will report its third quarter (Q3) earnings for 2019 on Wednesday 16 October 2019.
Netflix results Q3 2019 earnings preview, what does ‘the Street’ expect?
A consensus of estimates from Bloomberg-surveyed analysts arrive at the following expectations for the Q3 2019 Netflix results:
- Revenue: $5.25bn (+31.3% y/y)
- Net income on an adjusted basis: $532.571m (+13.8% y/y)
- Operating profit: $834.433m
- Earnings before tax depreciation and amortisation (EBITDA): 964.810m (+65% y/y)
- Earnings per share (EPS) on an adjusted basis: $1.24 (+20.5% y/y)
- EPS - generally accepted accounting principles (GAAP): $1.04 (+17.5% y/y)
Investors will be hoping to see a recovery in Q3 from what was a weak Q2 for the group. Q2 2019 results saw new net paid additions of 2.7 million, where five million additions were expected. Earnings growth was further inhibited by currency translations, higher corporate taxes and increased spend over the period.
However, Netflix has guided towards a much stronger Q3 in terms of paid subscribers and has a history of exceeding estimates where a miss was realized in the preceding quarter.
The group has guided the following in terms of expectations for subscriber growth in Q3 2019:
- Total net paid additions: 7 million
- Net paid additions in the US: 0.8 million
- Net paid additions internationally: 6.2 million
The Q3 reporting period looks to be the last full quarter before the competitive streaming landscape ramps up with the Disney+ and Apple TV+ services set to launch before year end.
Read more about competition in the streaming space
How to trade the Netflix results
A Thomson Reuters poll of 44 analysts maintain a long-term average rating of buy for Netflix (as of 9 October 2019), with 16 of these analysts recommending a strong buy, 14 recommending a buy, 11 hold, one sell and two strong sell.
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Of IG clients with open positions on Netflix (as of 9 October 2019), 68% expect the share price to rise in the near term, while 32% of IG clients with open positions on the company expect the price to fall.
Client sentiment
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Netlix results: technical analysis
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The 20, 50 and 200-day simple moving average (SMA) show the short, medium and long-term trend bias for the share price of Netflix to be down. The stochastic oscillator is trading in neutral territory, providing very little short-term directional insight.
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The price action of Netflix shows that a downtrend has been in place since the release of the Q2 2019 results. The price is currently testing trendline resistance.
Trend followers might consider a short sell opportunity on a confirmed bearish price reversal off trendline resistance, targeting a move towards support at 25,200. A break of the 252 level (confirmed with a close) would consider 230 a further downside target. In this scenario a close above the 283 resistance level might be used as a stop-loss consideration.
Traders who are bullish on Netflix, might prefer to wait for confirmation of a short-term trend reversal. A bullish trend reversal would be considered if the share price instead broke the current downtrend and closed above the 283 level (which is also our stop loss consideration for a short position). In this situation traders might look to the 301 level as a near-term upside resistance target.
In Summary
- Q3 2019 revenue is expected to increase by 33.1% year-on-year (y/y)
- Q3 2019 EPS on an adjusted basis is expected to increase by 20.5% y/y
- A Thomson’s Reuters poll of 44 analysts have an average long-term rating of buy for Netflix
- 68% of IG clients with open positions in Netflix expect the price to rise in the near term
- The charts show the price trend for Netflix to be down
- Traders looking to short Netflix might look to the 252 and 230 levels as downside support targets, using a close above 283 as a stop loss consideration
- Traders wanting to go long on Netflix might prefer to wait for a break of the 283-resistance level as confirmation of a short-term trend reversal
- Should a trend reversal manifest, 301 would be the next upside resistance target considered
This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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