Can Netflix Beat EPS Estimates?
Can Netflix Beat EPS Estimates?
By:Mike Butler
A focal point for this earnings call will be information around the ad tier vs. premium tier account levels and intentions regarding live sports
- Netflix is set to report quarterly earnings on Thursday, April 18 after the market closes.
- The streaming giant is expected to report EPS of $4.54 on $9.28 billion in revenue.
- This EPS figure is over twice the expectation from last quarter, which Netflix missed by 5.47%.
Netflix (NFLX) is up over 25% in 2024 so far, continuing bullish momentum after a strong earnings call on Jan. 23.
The company is now set to hold another earnings call on Thursday, April 18 at 3 p.m. Central Time after the market closes.
Last quarter, the streaming giant missed earnings-per-share (EPS) estimates but exceeded revenue forecasts and the stock rallied on positive guidance. This time, the streaming giant is expected to report EPS of $4.54 on $9.28 billion in revenue.
Will Netflix break out of its current range?
NFLX stock has been trading in the $40 range since the beginning of March, so it will be interesting to see if the stock breaks out to the upside or downside after the call on Thursday.
Starting in January 2025, Netflix will be the exclusive home to WWE's Raw, the consistently popular wrestling organization in the United States, Canada, the United Kingdom and Latin America. It appears the streaming giant is making a push towards live sports content, which could draw in a much larger audience relative to those who just binge their favorite shows.
At the end of 2023, Netflix offered some positive statements in a shareholder letter:
"Entertainment has always been a fast-changing industry—with new technology and consumer behavior patterns creating new business models. Choice and control are the price of entry in modern entertainment, and that is streaming. It’s what consumers want, and we believe it’s the best way for our industry to stay relevant and growing. As Netflix has shown, it can also be a very healthy business. Since our global launch in 2016, we’ve been able to invest heavily in our slate — with content amortization up almost 3X from $4.8B in 2016 to $14.2B in 2023 — while steadily increasing our operating margins (up more than 5X, from 4% to 21% over the same period) and growing our free cash flow (from negative $3.3B in 2019 to positive $6.9B in 2023)."
Looking at the options chain, we can gather information around expected stock price moves through different expiration cycles with implied volatility. This week, the expected stock price move is +-$51.63. This makes up about 8% of the current stock price, which is a pretty high expected move compared to other popular equities. Looking further, we can see that the January 2025 expected stock price move is +-$149.25. This earnings call accounts for a third of the expected move through January of next year, so the market is expecting fireworks this time around.
Bullish on Netflix for earnings
Traders and investors that are bullish on Netflix for this earnings call are likely expecting a strong guidance for the rest of the year, with more information around the future of live sports and expansion efforts.
Netflix's ad-supported membership tier should begin to show some real revenue strength as the user base continues to grow over time, attracting big advertising dollars. With such a huge increase in EPS expectations, it seems the market is expecting plenty of strength from this earnings call.
Bearish on Netflix for earnings
Earnings participants that are bearish on Netflix for this earnings call are likely looking for an EPS and/or revenue miss.
Netflix may not exceed strong expectations. And if that's the case it may scare off investors in the volatile market we're seeing today. The competitive landscape is getting stronger as well, with huge companies like Apple (AAPL) and Amazon (AMZN) making large investments into their own streaming platforms.
Tune in to Options Trading Concepts Live on Thursday ahead of the call for options strategy ideas for Netflix 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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