Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

Q4 US earnings preview: Netflix and its great expectations

Market-darling, speculator-favourite: Netflix’s results will be one of the highlights of this quarter’s US reporting season.

Having traded in a high-to-low range of over 45 per cent in the last six months, Netflix’s share price has proven prone to extreme upward and downward swings, caused by a host of macro and micro drivers.

Of course, because of its status as one of Wall Street’s most popular tech-sector growth stocks, one factor impacting the Netflix share price has been developments in the broad information technology sector.

It must be stated, that given its subscriber-based, streamed-content driven product offering, Netflix shares have been shielded from most fears regarding the US-China trade war that has affected the likes of Apple and myriads of US chipmakers.

But due to the perception held by some that Netflix is little more than another “tech-unicorn”, the company’s share price has at stages suffered from souring sentiment towards US tech-stocks, along with US equities more generally.

During December’s market-rout, Netflix shares fell over 19 per cent, and during October’s major sell-off, they fell by almost 22 per cent.

True to form, though, the price did bounce back on both occasions, and as of the beginning of reporting season, is trading 30 per cent above its yearly lows.

Looking at Netflix’s fundamentals, according to Bloomberg data, equity analysts are expecting EPS to have fallen to $0.24 in Q4, down from $0.89 in Q3.

The contraction in EPS is down to transitory factors related to higher content costs, with the company’s top line expected to have grown by 28 per cent for the quarter.

Promisingly for the bulls, analysts are forecasting a solid result for the key subscriber net adds metric: an increase of 9.25m users, up from a gain of 6.81 in the previous quarter.

Ultimately, according to the gamut of broker analysts, the consensus price target for Netflix shares is $381, with 29 analysts of the surveyed 43 giving a “buy recommendation”.

Considering the pre-reporting season consensus forecast from sell-side analysts, the technical set-up for Netflix becomes interesting.

The velocity of the recovery in Netflix’s share-price makes the company look slightly overbought in the short-term. Under normal trading conditions, a temporary pull back to a support level at $US311, which incidentally coincides with a convergence of the prices 100-day and 200-day EMA, might be expected.

However, Netflix’s looming earnings report superordinates the technical dynamics. An earning’s surprise could shift market technicals enough to inspire a considerable move in either direction.

If the company’s earnings managed to beat estimates, impetus conceivably exists in the short-to-medium term for a rally in its share price to analyst’s consensus price target at $US381 – a price that incidentally sits just below a technical level of resistance at $US386.

Whatever the outcomes of this quarter’s earnings, the numerous factors at play influencing Netflix’s share price have the company positioned for another potentially volatile quarter, offering traders with risk tolerance an opportunity to trade its possible swings.

This information has been prepared by IG, a trading name of IG Markets Limited. 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. See full non-independent research disclaimer and quarterly summary.

See your opportunity?

Seize it now. Trade over 17,000 markets on our award-winning platform, with low spreads on indices, shares, commodities and more.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Sunday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of spread betting and CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.