Netflix Earnings Preview—8% Stock Price Move Expected

Analysts expect earnings per share of $4.77 on $9.53 billion in revenue

• Netflix will report quarterly earnings on Thursday, July 18, after the stock market closes.
• The expectation is earnings per share (EPS) of $4.77 on $9.53 billion in revenue.
• Last quarter, Netflix crushed estimates, but the stock fell almost 10% after the company said subscriber number reports would stop and revenue guidance was weakened.
• The streaming giant forecasts revenue growth of 13%-15% in FY ’24, and we’ll receive more info on the earnings call.

Netflix earnings preview

Netflix (NFLX) will look to reverse last quarter's earnings sell-off this Thursday with a quarterly earnings report. The streaming behemoth is expected to report an EPS (earnings per share) of $4.77 on $9.53 billion in revenue. Both estimates have been raised from last quarter's earnings beat, even though the stock sold off after the announcement, creating the biggest single-day decline since April 2022.

NFLX stock is up over 36% YTD after opening 2024 at $483.19 and sitting at $659 ahead of earnings.

After the last earnings announcement, Netflix released a letter to shareholders about its growth and sustainability strategy: “For FY ’24, we forecast revenue growth of 13% to 15%. We’re raising our FY ’24 operating margin forecast to 25%, based on F/X rates as of January ‘24, up from 24%."

"We have built a hard to replicate combination of a strong slate, superior recommendations, broad reach and intense fandom, which drives healthy engagement on Netflix,” the letter said. “Improvement in these key areas is the best way to delight our members and continue to grow our business."

Netflix cited the ability to go viral with certain shows like Squid Game and Squid Game: The Challenge (one of my favorites!), and from an advertising standpoint those moments are huge for a company that thrives on engagement.

Netflix has also branched off into the NFL docuseries world, with Quarterback and Receiver hitting screens and enthralling football lovers. With the Paris Olympics coming up soon, the docuseries SPRINT is getting a lot of attention.

It seems Netflix is pressing all of the right buttons, but the stock market still expects plenty of volatility given the lack of subscriber numbers moving forward.

Many active investors are expecting plenty of movement after Netflix earnings this week, with an expected stock price move of +/- 8% this week based on current implied volatility.

Implied volatility can help us see what the market is expecting from a stock price in different timeframes based on options prices.

Looking further to the end of the year, we can see the December options cycle has an expected move of +/- $124.68, and this week's earnings announcement makes up over 40% of that figure at +/- $52.72 for the earnings announcement.

Bullish on Netflix for earnings

Bullish investors likely believe Netflix will blow the earnings forecast out of the water and offer a stronger outlook for the rest of the year. The company thrives on engagement and the "Netflix Effect,” so the more they can harness the attention of consumers, the better all aspects of the business will perform. Netflix has been consistent with strong shows and building new content, and that will have to continue for the foreseeable future if the company expects to crush the rest of 2024.

Bearish on Netflix for earnings

Many bears were delighted to see the stock price drop after the last earnings call, even though the streaming giant crushed EPS and revenue expectations. Those figures are now higher this quarter, and Netflix execs will need to do whatever it takes to paint a better picture for the rest of the year. Removing subscriber reporting certainly didn't help the cause last quarter, and any sort of EPS or revenue miss paired with a cloudy forecast could send this stock tumbling after the close on Thursday.

Tune in to Options Trading Concepts Live on Thursday at 11 a.m. CDT for a full options trading strategy breakdown in NFLX stock ahead of earnings!

Mike Butler, tastylive director of market intelligence, has been in the markets and trading for a decade. He appears on Options Trading Concepts Live, airing Monday-Friday. @tradermikeyb  

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