Netflix Pre-earning Analysis
Chart done on daily timeframe. The world’s largest streaming platform is set to report earnings this week and expectations are extremely optimistic for the first quarter of the year. Analysts expect the company’s profits to double quarter over quarter from 2.11 EPS to 4.49 EPS. Netflix missed their quarterly profit estimates last quarter, but the stock still saw a massive boost after the surpassed subscriber expectations. Netflix closed out last year with more than 260 million subscribers thanks to their password sharing crackdown, boosting them to the most subscribers they’ve ever booked. Of course with more subscribers comes more revenue, but analysts will really be focused on profitability since the company’s last profit miss. The 4.49 EPS is a very high number to hit so if they do meet it then we expect a very positive reaction from the stock. Netflix’s current price to earnings ratio is 52, more expensive than other magnificent 7 stocks and the healthy 15-25 average. There are two ways for a company to bring down its price to earnings ratio, either by raising its profits or by the stock’s price declining. Netflix has grown its net income consistently year over year with a slight exception in 2022, but overall they’re heading in a direction which may justify their current valuation.
Option chain analysis:
Netflix options expiring on April 19th currently reflect an implied volatility reading of 101%, which translates to about a $55 move in the underlying stock. Whether that’s up or down will depend on the quarterly report and what’s said on the earning’s call. The stock could also flat line if nothing significant comes out, which would crush both sides of the option chain.