NFLX Pre-earnings Analysis

NFLX Pre-Earnings Analysis:

Chart done on daily timeframe. The streaming king is set to report earnings this week on Tuesday after market close. Netflix will be on the first large cap tech companies to report earnings so many investors are watching close to determine consumer behavior in the steaming sector. The company is expected to beat expectations thanks to their advertising support plan, but rising competition in the space from Prime, Disney+, and Hulu could hold weight on Netflix’s growth. The biggest opportunity for the company remains the same as it was years ago, which is the international market. Netflix has done a great job at keeping the American consumer, and they’re applying different methods in attempt to capture international viewers. 

Other companies such as Meta and Google enjoy a large percentage of revenue from advertising, and now that Netflix offers its ad-supported plan, it will be joining the ranks. This could be the difference maker in Netflix’s future, especially that it adds a whole new stream of income for them. 

Netflix has done a great job at surpassing revenue expectations in 2023, and despite struggling at the start of the year to bring yearly income growth, they came back strong in Q2 and Q3. Analysts have lower their EPS projections from last quarter’s 3.46 per share to 2.20 a share, which is very doable for the company. We expect Netflix to beat earnings, but their 2024 guidance will be a large determinant of which direction the stock moves. 

Option chain analysis:

Netflix’s option chain is currently reflecting about a 96% implied volatility for this week’s contracts, which translates to about a $40.00 move, but there’s not telling which direction yet. This means that if Netflix doesn’t move by the expected amount, many OTM contracts will be crushed to zero. We’ve highlighted the resistance and support points we can expect NFLX to move to following the earnings, with 565.00 being the bullish target and 390.00 the bearish.