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KEY
TAKEAWAYS
- NFLX is near a powerful resistance stage and will break above it if the corporate beats earnings estimates
- Netflix’s inventory value has been trending greater since July 22 after the inventory took a deep plunge
- Count on plenty of volatility after NFLX broadcasts earnings on Thursday following the shut
It is showtime! On Thursday, after the inventory market closes, Netflix, Inc. (NFLX) will announce Q1 earnings. The inventory is near a significant resistance stage. Will it break by way of when it stories earnings? Or will it fall? The reply depends upon whether or not it beats or misses.
Wall Avenue analysts anticipate stellar outcomes—NFLX is predicted to report adjusted EPS of $4.52 per share, effectively above the $2.88 within the prior-year quarter. Income is projected at $9.27 billion, up 13.6% from a yr in the past.
A Longer-Time period View of NFLX Inventory
Wanting on the weekly chart of NFLX (see beneath), the inventory value is approaching its all-time excessive. NFLX inventory is buying and selling above its 13-week easy transferring common (SMA), and its relative efficiency suggests NFLX is underperforming the S&P 500 ($SPX) on a weekly scale.
Notice: The 13-week SMA represents one quarter.
FIGURE 1. WEEKLY CHART OF NFLX STOCK. NFLX has been trending greater since July 2022. Whether or not the inventory continues on this route depends upon its earnings report. The inventory is near its 13-week SMA and is approaching a powerful resistance stage.Chart supply: StockChartsACP. For instructional functions.
If NFLX beats analyst estimates and delivers robust steering, its inventory value may attain its all-time excessive and have sufficient follow-through to rally greater. NFLX has quite a bit up its sleeve.
Regardless of growing competitors from Apple (AAPL), Amazon (AMZN), Walt Disney (DIS), and Comcast (CMCSA), NFLX has maintained its management place within the streaming house. NFLX continues releasing extra content material and plans to broaden its sports activities choices, together with the stay occasion of Mike Tyson vs. Jake Paul this summer season. There are many different sports activities content material within the works, all of that are anticipated to attraction to a broader viewers.
If all goes as anticipated, NFLX may soar effectively previous $700, however earnings stories can transfer the inventory value both method. With the earnings launch coinciding with an general fairness market correction, if earnings disappoint or if steering is weak, NFLX may see a large selloff. Some areas that might be delicate are promoting income and the variety of new memberships.
If the inventory value falls beneath its 13-week SMA, it might be a repeat of what occurred on the finish of 2021 after the inventory value hit its all-time excessive. Notice how steep the descent was.
A Shorter-Time period View
Turning to the every day chart, NFLX inventory is buying and selling simply above its 50-day SMA, however the relative energy index (RSI), an indicator that gauges momentum, presents an intriguing image. Whereas NFLX’s inventory value was trending greater (late Jan to April 2024), the RSI (decrease panel) was trending decrease. This raises a crimson flag, because it signifies that momentum is slowing—a bearish divergence.
FIGURE 2. DAILY CHART OF NFLX STOCK. The divergence between value and RSI is regarding, however that might be as a result of buyers await the earnings outcomes earlier than deciding to purchase or promote NFLX inventory.Chart supply: StockChartsACP. For instructional functions.This begs a sanity verify to see if NFLX is technically robust. Including the StockCharts Technical Rank (SCTR) to the chart is useful. The SCTR rating is at round 97, which signifies that NFLX continues to be a powerful inventory (higher panel).
Ultimate Ideas
Wanting on the choices quotes for NFLX in StockCharts, the implied volatility (IV) of choices expiring on Friday, April 19, is round 150%. This implies you’ll be able to anticipate plenty of volatility in NFLX’s inventory value across the earnings date. This may occasionally clarify why the RSI has declined—buyers are awaiting the earnings report.
There’s additionally elevated exercise within the out-of-the-money name choices, which signifies that the directional bias is to the upside as of this writing.
FIGURE 3. OPTIONS DATA FOR NFLX. Choices expiring on April 19 present excessive IV, with the out-of-the-money name choices displaying elevated buying and selling exercise.Chart supply: StockCharts.com. For instructional functions.
The underside line: Count on plenty of volatility in NFLX after the market closes on Thursday. When you’re contemplating including NFLX to your portfolio, wait till the worth settles after the earnings announcement.
Be taught Extra. Need to commerce choices to generate extra earnings or hedge your portfolio holdings? Try this video.
Disclaimer: This weblog is for instructional functions solely and shouldn’t be construed as monetary recommendation. The concepts and techniques ought to by no means be used with out first assessing your personal private and monetary state of affairs, or with out consulting a monetary skilled.
Jayanthi Gopalakrishnan is Director of Website Content material at StockCharts.com. She spends her time arising with content material methods, delivering content material to coach merchants and buyers, and discovering methods to make technical evaluation enjoyable. Jayanthi was Managing Editor at T3 Customized, a content material advertising and marketing company for monetary manufacturers. Previous to that, she was Managing Editor of Technical Evaluation of Shares & Commodities journal for 15+ years.
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