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Oct 15, 2020

Netflix Set to Report Third Quarter Earnings Results

The new normal in terms of the economy has helped some companies. As more and more people work from home and stay home rather than going out, certain companies have seen the demand for their services grow. Netflix (NFLX) is one of the companies that seems to be benefitting.

The company is set to report third quarter earnings results on October 20 and it is expected to show earnings growth of 44.9% over the third quarter of last year. Earnings are also expected to jump by 33% over the second quarter.

Netflix has seen earnings grow by 82% per year over the last three years while revenue has grown by 30% per year. Second quarter results showed EPS growth of 165% over the previous year and revenue was up 25%. The company’s return on equity is well above average at 29.1% while the profit margin is slightly below average at 10.2%.

Looking at the Tickeron Scorecard for Netflix we see that the stock is rated as a “strong buy”. The company scores positive results in three fundamental categories and it receives one negative result—the Valuation Rating. The stock is currently trading with a trailing P/E of 91 and a forward P/E of 62. The three positive results are in the Profit vs. Risk rating, the SMR rating, and the Price Growth rating.

We also see that the stock has four bullish signals and two bearish signals from the technical indicators. The bullish signals are from the AROON indicator, MACD, Momentum, and the Moving Averages. Three of the signals came 10 days ago and one was 22 days ago. The two bearish signals are from the RSI and Bollinger Bands. The bearish signal from the RSI was generated 22 days ago while the signal from the Bollinger Bands came nine days ago.

The weekly chart shows an upwardly sloped trend line that connects the lows from the past year, with the exception of the extreme low in March. I have seen this pattern with a number of stocks and I attribute it to the meltdown in February and March being a black swan event. Investors sold everything without really considering which companies could potentially benefit from the economic lockdowns that were being implemented. Investors panicked.

We see that the stock dropped for the first two and a half months of the third quarter before turning higher over the last four weeks. The pullback allowed the 10-week RSI and the weekly stochastic readings to move out of overbought territory. The RSI dropped down to the 50 area and the stochastic indicators fell below the 50 level. The indicators hadn’t been that low since last November.

Something that is unique to Netflix is how its report is analyzed. For most companies investors focus on three things— earnings, revenue, and the outlook. For Netflix there is a fourth element that is always watched closely and that is the subscriber growth.

In the first half of 2020, Netflix added 25.9 million subscribers which is approximately the same number of subscribers that were added in the entire year of 2019. As part of the second quarter report, management put a damper on investor expectations by saying it only expected 2.5 million in subscriber growth for the third quarter. Despite the outlook from management, two different analysts have made statements that run counter to the downbeat forecast from management. An analyst from KeyBanc Capital raised his price target on October 15 and he cited subscriber growth as one of the reasons. An analyst with Goldman Sachs raised his price target on October 14 and the raised target also cited subscriber growth as one of the reasons.

Seeing these kinds of actions ahead of an earnings report might seem like good news, but it could also be a sign that expectations are running high. Investors should consider the expectations as a hurdle—the higher they are, the harder it is to clear.

Related Ticker: NFLX

Momentum Indicator for NFLX turns positive, indicating new upward trend

NFLX saw its Momentum Indicator move above the 0 level on May 03, 2024. This is an indication that the stock could be shifting in to a new upward move. Traders may want to consider buying the stock or buying call options. Tickeron's A.I.dvisor looked at 82 similar instances where the indicator turned positive. In of the 82 cases, the stock moved higher in the following days. The odds of a move higher are at .

Price Prediction Chart

Technical Analysis (Indicators)

Bullish Trend Analysis

The Moving Average Convergence Divergence (MACD) for NFLX just turned positive on May 06, 2024. Looking at past instances where NFLX's MACD turned positive, the stock continued to rise in of 48 cases over the following month. The odds of a continued upward trend are .

NFLX moved above its 50-day moving average on May 07, 2024 date and that indicates a change from a downward trend to an upward trend.

The 10-day moving average for NFLX crossed bullishly above the 50-day moving average on May 16, 2024. This indicates that the trend has shifted higher and could be considered a buy signal. In of 14 past instances when the 10-day crossed above the 50-day, the stock continued to move higher over the following month. The odds of a continued upward trend are .

Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where NFLX advanced for three days, in of 312 cases, the price rose further within the following month. The odds of a continued upward trend are .

NFLX may jump back above the lower band and head toward the middle band. Traders may consider buying the stock or exploring call options.

The Aroon Indicator entered an Uptrend today. In of 304 cases where NFLX Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are .

Bearish Trend Analysis

The 10-day RSI Indicator for NFLX moved out of overbought territory on May 22, 2024. This could be a bearish sign for the stock. Traders may want to consider selling the stock or buying put options. Tickeron's A.I.dvisor looked at 42 similar instances where the indicator moved out of overbought territory. In of the 42 cases, the stock moved lower in the following days. This puts the odds of a move lower at .

The Stochastic Oscillator demonstrated that the ticker has stayed in the overbought zone for 14 days. The longer the ticker stays in the overbought zone, the sooner a price pull-back is expected.

Following a 3-day decline, the stock is projected to fall further. Considering past instances where NFLX declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .

Fundamental Analysis (Ratings)

Fear & Greed

The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating outstanding price growth. NFLX’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.

The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.

The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to consistent earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.

The Tickeron Seasonality Score of (best 1 - 100 worst) indicates that the company is fair valued in the industry. The Tickeron Seasonality score describes the variance of predictable price changes around the same period every calendar year. These changes can be tied to a specific month, quarter, holiday or vacation period, as well as a meteorological or growing season.

The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating well-balanced risk and returns. The average Profit vs. Risk Rating rating for the industry is 88, placing this stock slightly better than average.

The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is slightly overvalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (12.920) is normal, around the industry mean (5.659). P/E Ratio (51.065) is within average values for comparable stocks, (87.119). Projected Growth (PEG Ratio) (1.889) is also within normal values, averaging (2.822). NFLX has a moderately low Dividend Yield (0.000) as compared to the industry average of (0.040). P/S Ratio (8.190) is also within normal values, averaging (28.859).

Notable companies

The most notable companies in this group are Netflix (NASDAQ:NFLX), Walt Disney Company (The) (NYSE:DIS), Roku (NASDAQ:ROKU), Paramount Global (NASDAQ:PARA), iQIYI (NASDAQ:IQ), HUYA (NYSE:HUYA), AMC Entertainment Holdings (NYSE:AMC).

Industry description

Movies/entertainment industry include companies that produce and distribute motion pictures, and companies that operate general entertainment facilities like amusement parks and bowling centers. Some companies in this industry also have professional sports franchises. Live Nation Entertainment, Inc., Liberty Media Corp. and Viacom Inc. are some of the biggest companies in this space.

Market Cap

The average market capitalization across the Movies/Entertainment Industry is 9.22B. The market cap for tickers in the group ranges from 134 to 262.83B. NFLX holds the highest valuation in this group at 262.83B. The lowest valued company is LRDG at 134.

High and low price notable news

The average weekly price growth across all stocks in the Movies/Entertainment Industry was 0%. For the same Industry, the average monthly price growth was 3%, and the average quarterly price growth was 11%. ICABY experienced the highest price growth at 111%, while HWAL experienced the biggest fall at -41%.

Volume

The average weekly volume growth across all stocks in the Movies/Entertainment Industry was -44%. For the same stocks of the Industry, the average monthly volume growth was -63% and the average quarterly volume growth was 144%

Fundamental Analysis Ratings

The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows

Valuation Rating: 53
P/E Growth Rating: 62
Price Growth Rating: 56
SMR Rating: 83
Profit Risk Rating: 88
Seasonality Score: 17 (-100 ... +100)
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NFLXDaily Signal changed days agoGain/Loss if shorted
 
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a provider of online movie rental subscription services

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