Netflix Earnings Preview: A 7% Stock Price Move Expected
Netflix Earnings Preview: A 7% Stock Price Move Expected
By:Mike Butler
Netflix is set to report quarterly earnings on Jan. 23. Can NFLX maintain its upward trajectory and beat expectations?
- Netflix is set to report quarterly earnings on Jan. 23.
- Netflix beat EPS and revenue estimates last quarter.
- The EPS estimate for this earnings announcement is down from $3.49 to $2.23.
From mid-October to today, Netflix (NFLX) has rallied from a low of $344.73 to the current price of $487.91. The stock reached a recent high of $503.41 on Jan. 11.
The popular streaming video company contributed to the change in how we consume television shows and movies. Its most recent change has been the ad-tier subscription model that came onto the scene in November 2022.
Since then, it's been a focal point for each of its earnings calls. Investors and traders want to hear how the growth has affected the bottom line and the number of new subscribers the company projects going forward.
Netflix recently cracked down on password sharing as well to improve revenue numbers, and I was personally impacted by that change. Expectations are high for the streaming giant, so it will be interesting to see how the numbers pan out for the upcoming earnings call on Tuesday, Jan. 23.
The market is expecting a +-$38.61 stock price moves this week for earnings based on current implied volatility. This is just over 7% of the current stock price, which puts this earnings report's implied volatility right in the middle of the range of what we typically see (5-10%).
When we look further to the March 2024 options expiration though, we can see that this expected move makes up a large chunk of the expected stock price move for the next few months ($38.61 compared to $54.58).
Bullish on Netflix for earnings
One of the biggest aspects of the earnings call coming up for Netflix is the drastically reduced earnings per share (EPS) estimate. The EPS estimate for this earnings announcement is down from $3.49 to $2.23, even though last quarter it reported an EPS beat of $3.73.
A figure $1.50 lower than the previous report is pretty staggering, and it could be perceived in a few ways. If it blows the EPS out of the water it could be seen as a bullish result considering the reduction, but if Netflix misses, or just barely beats the lowered expectation, that may not be good for the stock price.
Time will tell how this is perceived, but if you believe the successful ad-tier subscription model will continue to propel the profit margins of Netflix, we may see a rise in the stock price on a revenue and EPS beat.
Bearish on Netflix for earnings
To put it simply, if Netflix misses EPS estimates that are already reduced, I think that could drag the stock price down that's already near recent highs. Any sort of negative sentiment on the earnings call could be a bearish signal for the announcement as well, but I think it's really going to come down to the EPS figure as the consensus is that the ad-tier model is doing very well for the streaming giant.
Join us on Options Trading Concepts Live on Jan. 23 at 11 a.m. Central Time for some earnings strategy ideas in Netflix ahead of the earnings report after the market closes.
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
For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.
Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.