- Netflix is set to report earnings later today.
- Consensus expectations are high, and the company has no room for error.
- Ahead of earnings, the stock appears to be fairly valued with a slight downside in the offing.
Tech stocks, the engine of the recent bull market, are now in the spotlight as Q2 earnings season heats up. All eyes are on Netflix (NASDAQ:), the dominant streaming giant, reporting its results after the closing bell today.
This report will be crucial for gauging the health of the streaming industry and could impact the broader market sentiment.
Netflix boasts impressive year-to-date gains, with its stock surging 33%, while competitors like Paramount Global (NASDAQ:) and Warner Bros Discovery (NASDAQ:) have fallen 19% and 26%, respectively.
However, the streaming giant faces a critical test as its stock has pulled back over 7% since reaching a more than 2-year high of $697.23 earlier this month.
In this article, we will analyze what investors can expect from the high-stakes earnings release later on today.
Anticipating Netflix’s Quarterly Results
In terms of key data, analysts are forecasting an average EPS of $4.76, almost 10% down on the first quarter, but up 44.6% year-on-year.
Source: InvestingPro
Sales are expected to reach $9.531 billion, compared with $9.37 billion in the previous quarter and $8.187 billion a year earlier, representing an annual growth of 14.4%.
Beyond these main figures, investors will also be interested in some specific details of Netflix’s results, starting with the number of new subscribers, which is expected to be 4.7 million, compared with 5.9 million last year.
Also of interest is the subscriber growth for the discounted, ad-supported plan, noting the company’s pricing strategies to steer more subscribers towards the ad-supported version.
It’s worth noting that Netflix shares plummeted following a cautious forecast, despite higher than expected Q1 EPS, showing the importance of future outlooks.
Analysts Expressing Doubts on Earnings Outcome
Some analysts are cautious about Netflix’s upcoming results. Goldman’s Eric Sheridan pointed out a decline in app downloads during the quarter, raising concerns.
Citi analysts estimate that the company might slightly surpass net addition estimates but could fall short of investor expectations focusing on areas such as advertising and content strategy.
Analysts exhibit mixed views on Netflix’s share price targets, with limited upside potential from the current price.
Source: InvestingPro
Valuation models, including InvestingPro Fair Value, signal caution ahead, emphasizing potential risks.
Final Thoughts
Netflix approaches its earnings release amidst elevated levels, with analysts’ expectations high, posing downside risks.
Beyond the immediate impact on Netflix’s share price, these results could influence the broader technology sector, already showing signs of strain.
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