Netflix Earnings Preview—The Market Expects a Stock Price Move of Nearly 10%

That means a possible range of approximately $150, based on current implied volatility

• Netflix reports quarterly earnings on Jan. 21 after the market closes.
• The weekly expected stock price move is almost 10% of the stock price.
• The company is expected to report earnings per share of $4.21 on $10.11 billion in revenue.
• It has a strong earnings history, beating estimates three quarters in a row

Netflix (NFLX) is set to announce earnings on Tuesday, Jan. 21, after the market closes, and the stock market is expecting fireworks. With almost a 10% stock price expected move based on the current price of around $865, we're looking at about a $150 implied range based on current implied volatility in the options market.

NFLX stock had a stellar 2024, and the price is down about 10% from the all-time high of $941.75 realized in December.

Many analysts are bullish on the stock, but we're at an interesting crossroads with the earnings-per-share (EPS) estimate coming in lower than last quarter, while the revenue estimate is higher.

Netflix is expected to report an EPS of $4.21 on $10.11 billion in revenue.

After the last earnings call, Netflix released a letter to shareholders outlining 2024 success and a forecast for 2025: “We’ve delivered on our plan to reaccelerate our business, and we’re excited to finish the year strong with a great Q4 slate, including Squid Game S2, the Jake Paul/Mike Tyson fight and two NFL games on Christmas Day.

As we look ahead to 2025, we’re focused on improving every aspect of our service and continuing to deliver healthy revenue and profit growth."

The letter went on to day that ”we’re pleased that we’ve reaccelerated our growth and, as we head into 2025, we expect to deliver solid revenue and profit growth by both improving our core series and film offering while investing in new growth initiatives like ads and gaming. For 2025, based on F/X rates as of 9/30/24, we forecast revenue of $43 billion-$44 billion, which would represent growth of 11%-13% off of our 2024 revenue guidance of $38.9 billion. We expect revenue growth to be driven by a healthy increase in paid memberships and ARM."

It's clear there is room for growth for Netflix, and the landscape seems to be shifting with a lot of streaming services battling for live sporting event rights. I only see that continuing into the future, which is exciting for viewers considering the high production value for the NFL games on Christmas Day, But the Jake Paul/Mike Tyson fight came with a lot of broadcast hiccups, spotty service and less-than-ideal clarity.

Looking at the options market can help put context around the stock price's expected move for the earnings announcement next week.

We currently have an expected stock price move of +/- $72.86 through next week, which clocks in at over 8% of the notional value stock price of $865. This puts NFLX on the higher end of the typical 5%-10% range we see for earnings announcements.

Looking to the May expiration cycle, we can see a +/- $143.52 stock price expected move. This means next week's earnings announcement accounts for over 50% of the expected range for the next 120 days. WOW!

I expect nothing but fireworks and uncertainty next week for the Netflix earnings call!

Bullish on NFLX stock for earnings

If you're bullish on Netflix for earnings, you're looking for an EPS and revenue beat with a strong forecast for 2025. The tangible success in live sporting events is certainly a boost for the future of live programming for Netflix, especially when paired with binge-worthy documentaries on the sports themselves. Netflix execs say there's room for growth, and 2024 success helps to show that. Still, if you're expecting the stock price to rise on Jan. 22, the company has to post a strong earnings report.

Bearish on NFLX stock for earnings

If you're bearish on Netflix for earnings, you're likely thinking the reduced EPS figure from last quarter is a warning sign that things may be sputtering out for the streaming giant. Last year, we saw big-name tech stocks like NFLX report great earnings numbers but the stock price dropped. Netflix beat EPS and revenue estimates on April 18, 2024, and the stock price still dropped, so earnings reports can still be very random.

All eyes are on Netflix earnings on Jan 21 after the market closes. Tune in to Options Trading Concepts Live on Tuesday at 11 a.m. CST for some options trade ideas ahead of the big earnings call!

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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