Netflix stock stalled ahead of Q4 earnings
Netflix stock is looking for a catalyst to drive a renewed rally in its stock price, after a year of huge subscriber growth.
When does Netflix report earnings?
Netflix reports earnings for the fourth quarter (Q4) on 19 January, the first tech/high-growth stock to publish figures for the most recent quarter in this earnings season.
Netflix earnings – what to expect?
Netflix expects to report earnings of $1.35 per share, up 3.8% year-on-year (YoY), while the Bloomberg consensus is $1.36, a 4.8% gain. Revenue is expected to have risen 21.2% to $6.62 billion, a reflection of the huge gains made in subscriber numbers over the year.
As in almost every earnings report, the focus for Netflix is more on the subscriber numbers than on the actual profit and revenue figures. It remains imperative for the group to keep current subscribers and acquire new ones, and to this end it has to constantly find and release new content. For example, it will release an original film every week in 2021, providing a steady drumbeat of new content for users. Having added just 2.2 million new subscribers in Q3, well below forecasts, the focus is on whether Netflix can recover its strong growth from the first two quarters of 2020. Q4 is forecast to have seen 6 million added, a significant improvement.
How to trade Netflix’s earnings
Netflix has beaten earnings forecasts in six of the last eight updates, and for five of the last eight for revenue estimates. The average move on results day is 4.7%, but Q3’s results saw the stock fall 7.6%. Current options pricing points towards a move of 6.8%. Of the 43 analysts covering the stock, 27 have ‘buy’ recommendations, with ten ‘holds’ and six ‘sells’.
Netflix stock price – technical analysis
Netflix hit a peak of $550 in early July, and since then the price has stalled, falling into a range from around $468 to $550. Ahead of results, the price is heading back towards the lower bound of the range, having touched the top end of the range at the beginning of the year. Investors will therefore be looking for a bounce from support, or a possible drop below this lower bound that will open the way to $400 and potentially lower.
Netflix waits on good news
While other big tech names enjoyed a solid 2020, Netflix’s was a year of two halves, with early gains succeeded by a mixed period of sideways trading as the positive news regarding subscribers in Q1 and Q2 faded. The stock is now waiting for a reason to continue to rally, with investors acutely aware of how the growth in subscribers has been matched by a steady increase in costs.
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
Please see important Research Disclaimer.
Seize a share opportunity today
Go long or short on thousands of international stocks.
- Increase your market exposure with leverage
- Get spreads from just 0.1% on major global shares
- Trade CFDs straight into order books with direct market access
Live prices on most popular markets
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.