Netflix share price: Q4 earnings preview

Netflix is now competing with Disney+ and Apple TV+, which could affect the group's US subscriber growth in Q4 2019.

When is Netflix earnings date?

Netflix Inc., the Nasdaq-listed, world-leading internet television network will report its fourth-quarter (Q4) earnings for 2019 on Wednesday 21 January 2020.

Netflix results Q4 2019 earnings preview: what does ‘The Street’ expect?

Netflix studios has seen its content receive the most nominations for the prestigious Golden Globes and Academy Awards (Oscars) ceremonies in 2020. While there is no doubt that the company is producing high quality content, markets will be looking to the results to ascertain whether strong subscriber and earnings growth was been maintained into the close of the year, as Walt Disney and Apple Inc launched their own competitive streaming services in the reporting quarter.

The group has guided the following in terms of expectations for subscriber growth in Q4 2019:

  • Net paid additions of 7.6 million subscribers
  • 0.6 million net paid additions in the US
  • 7 million net paid additions Internationally

A consensus of estimates from Bloomberg surveyed analysts arrive at the following expectations for the Q4 2019 Netflix results:

  • Revenue $5.45 billion (+30.2% year-on-year [YoY])
  • Net income on an adjusted basis: $335.250 million (+64.3% YoY)
  • Operating profit: $489.793 million
  • Earnings before interest, tax, depreciation and amortization (EBITDA): 624.500 million (+90.6% YoY)
  • Earnings per share (EPS) on an adjusted basis: $0.742 (+64% YoY)
  • EPS (generally accepted account principles [GAAP]): $0.529 (+76.4% YoY)

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 14 January 2020), with 15 of these analysts recommending a strong buy, 12 recommending a buy, 11 hold, 4 sell and 2 with a strong sell recommendation on the stock.

Broker ratings

About 65% of IG clients with open positions on Netflix (as of 14 January 2020) expect the share price to rise in the near term, while 35% of IG clients with open positions on the company expect the price to fall.

Client sentiment

Netflix results: technical analysis

The 20- and 50-day moving averages (20MA and 50MA) show the short- to medium-term trend bias for the share price of Netflix to be up. The stochastic oscillator is trading in neutral territory, providing very little short-term directional insight.

The price action of Netflix shows that an uptrend has been in place post the release of the group’s Q3 2019 results. In the very near term, we see the price within a range between levels 320 (support) and 343 (resistance).

Preferred technical analysis trading scenario

Trend followers may look for a break above resistance (343) into the results, or pullback to support (320) before the results, for long entry. Traders of a breakout might look to 384 as a longer-term upside target while traders buying near support might look to 343 as a resistance target. Only a close below trend line support at 305 would consider the short-term medium uptrend to be no longer valid.

Alternate technical analysis trading scenario

Traders who are contrarian by nature may instead look to trade against the prevailing uptrend. A short signal might be considered on a bearish price reversal around the 343-resistance level, targeting a move back towards support at 320. In this scenario, a close above the reversal price high may be used as a stop loss consideration.

In summary

  • Q4 2019 revenue is expected to increase by 30.2% YoY
  • Q4 2019 EPS on an adjusted basis is expected to increase by +60.4% YoY
  • A Thomson’s Reuters poll of 44 analysts has an average long-term rating of buy for Netflix
  • 65% 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 up in the short to medium term
  • Trend followers might prefer to wait for a break of resistance or reversal off support for long entry (preferred scenario)
  • A close below trend line support at 305 would consider the technical uptrend to be broken
  • Traders who are contrarian may prefer to look for short entry on a bearish reversal off resistance targeting a move back towards support (alternate scenario)

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