To The Moon

As Netflix, Inc. ( $Netflix(NFLX)$ ) prepares to unveil its Q4 earnings after the market closes on Tuesday, investors and analysts are buzzing with anticipation. The streaming giant has been on a rollercoaster ride, but with a history of beating earnings estimates, the question on everyone's mind is whether it can achieve yet another beat and push its stock price back towards the tantalizing $950 mark. Here's a breakdown of what analysts are expecting based on the latest information:

• Earnings Per Share (EPS): Analysts are forecasting an EPS of $4.21, which represents a significant increase from the previous quarter's $5.13. This suggests expectations for a strong performance, potentially due to effective cost management or higher revenues than anticipated.

• Revenue: The revenue expectation stands at $10.11 billion, which is an increase from the $9.77 billion in the previous quarter. This growth is likely influenced by continued subscriber gains and possibly by price increases or new revenue streams like the ad-supported tier.

• Subscriber Growth: While Netflix will stop reporting subscriber numbers regularly starting in 2025, the current expectation for Q4 2024 is a positive one. Posts on social media have indicated optimism about subscriber additions, with some analysts predicting a significant surge in global paid net additions. However, specific numbers for Q4 aren't provided in the available data.

• Operating Margin: There's a focus on profitability, with expectations for the operating margin to continue its upward trend, albeit exact figures for Q4 expectations are not explicitly stated. However, for 2025, Netflix has guided towards an operating margin of 28%, up from 27% in 2024.

• Content and Engagement: Netflix has been expanding into live events, including NFL games on Christmas Day and WWE content, which could drive subscriber engagement and potentially revenue. The company's strategy to offer a mix of high-quality original content, alongside these live events, is seen as a positive for subscriber retention and growth.

• Advertising: The growth of Netflix's ad-supported tier is also a point of interest, with analysts watching how this segment scales and impacts overall revenue. Netflix has indicated that ads will not be a primary growth driver until 2026 but has shown promising trends in sign-ups for this tier.

• Stock Performance: Analyst reactions post-earnings have typically been positive, with many raising price targets and maintaining bullish outlooks based on Netflix's growth metrics, content strategy, and profitability improvements. However, there's always the risk of market reactions if the numbers don't meet or exceed expectations.

In summary, expectations are high for Netflix's Q4 earnings with a focus on revenue growth, subscriber engagement through innovative content strategies, and the potential of the advertising model. However, the absence of subscriber count reporting from next year might shift focus more towards financial metrics like revenue and operating margins for gauging performance.

The sentiment around Netflix's stock is mixed but leans towards cautious optimism. Analyst David Joyce recently upgraded Netflix's target price from neutral to buy, setting a target of $955, reflecting confidence in its growth trajectory. Posts on social media have shown a divide, with some traders expecting a strong upward movement if earnings exceed expectations, while others are wary of a potential correction to $700. The options market is pricing in a volatility of about 7.96% post-earnings, suggesting expectations for movement but not necessarily direction.

From a technical standpoint, Netflix's stock is currently trading at around $858.1. The stock has been following an uptrend, with the next resistance level to watch being $874. A move past this could signal a test of higher resistances at $936 and potentially $1010, based on recent technical indicators like MACD and TSI, which hint at a bullish reversal. However, a significant earnings beat would be needed to propel the stock beyond these levels towards the $950 mark.

Can Netflix Achieve Another Earnings Beat?

Netflix has a commendable track record, with consecutive earnings beats over the last two years, driven by robust subscriber growth, international expansion, and now, the burgeoning ad-supported tier. The introduction of live sports and events, like NFL games on Christmas Day and WWE's "Monday Night Raw" in 2025, adds another layer to its revenue model. If the company can continue this trend, particularly by exceeding subscriber numbers or showing strong engagement with its new content, another beat is within reach.

Stock Performance Post Earnings Beat: If Netflix reports an earnings beat, the stock price could potentially move towards several key levels based on current technical analysis and sentiment:

• Immediate Resistance Break: If the earnings significantly exceed expectations, there's a good chance the stock could break through the immediate resistance at $874. This level has been highlighted as a pivotal point in recent technical analysis.

• Next Resistance Levels:

  A break above $874 might see the stock aiming for $936, which has been mentioned as a significant target in posts on social media.

  If the momentum continues, especially with positive guidance or news about subscriber growth or new revenue streams like ads, the stock could challenge the $1010 mark, which some analysts and traders have identified as an upper resistance or potential target.

• Technical Indicators Support: Given the bullish signals from MACD and TSI on the daily chart, a strong earnings beat could confirm these indicators, pushing the stock price higher.

• Post-Earnings Volatility: Options markets are pricing in a move of approximately 7.96% in either direction from the current price of around $858.1. If we apply this percentage to the current price, it suggests a potential high of about $924.5 if the beat is significant.

• Analyst Price Targets: Analysts have set price targets averaging around $868.47 for the next 12 months, with some optimistic predictions reaching up to $1,100. An earnings beat could accelerate the stock's movement towards these targets, especially if accompanied by positive future guidance.

Given this analysis:

• Short-term: A breakout above $874, potentially targeting $936 if the beat is substantial and the market sentiment turns very positive.

• Medium to Long-term: If the beat is accompanied by good forward-looking statements, the stock might aim for $1010 or even higher, aligning with some of the more bullish analyst predictions.

However, it's crucial to note that stock reactions can be unpredictable, and while an earnings beat generally pushes the stock price up, other market dynamics, trading volume, and broader market sentiment will also play significant roles in determining the exact level the stock reaches.

Optimism About Netflix's Recent Shows:

Netflix's content strategy has been a mixed bag, but recent hits like "Avatar: The Last Airbender," "Fool Me Once," and "The Gentlemen" have shown that its slate can still captivate audiences worldwide. The company's investment in diverse, high-quality content across genres and languages continues to be a strong draw for new and existing subscribers. The success of these shows could be pivotal in driving subscriber numbers and engagement, which are crucial for stock performance.

Conclusion:

The stage is set for Netflix to potentially surge if it beats earnings expectations. With the stock already showing signs of bullish momentum, a positive earnings report could indeed see it rebounding towards or even surpassing $950. However, investors should brace for volatility, given the mixed sentiment and the inherent unpredictability of market reactions to earnings announcements. Keep an eye on Netflix's subscriber numbers, content engagement metrics, and any guidance for the future, as these will be the true north for predicting the stock's next move.

@TigerWire