To The Moon

$Netflix(NFLX)$ delivered a stunning earnings report for the fourth quarter, sending its stock soaring to $995 in pre-market trading on January 22, 2025. The streaming giant exceeded expectations on both the top and bottom lines, raised its 2025 revenue forecast, and reported a record-breaking 19 million new subscribers in a single quarter, pushing its total memberships past the 300 million mark.

Let’s break down the latest results, evaluate Netflix’s prospects, and outline strategic ways to position for the next potential moves in Netflix stock.

Key Highlights from Netflix’s Earnings

Netflix’s latest performance highlights its continued dominance in the streaming market:

1. Record Subscriber Growth: 19 million new members added this quarter, the highest in company history.

2. Revenue Growth: Beat analysts' estimates, driven by robust adoption of ad-supported plans and increased engagement.

3. Raised Guidance: Management raised its 2025 revenue forecast, reflecting confidence in its pricing power and international expansion.

4. Content Success: Popular shows such as Redwood Chronicles and Galactic Ventures resonated globally, contributing significantly to engagement metrics.

This strong showing has prompted investors to reevaluate Netflix’s long-term growth potential, leading to a pre-market surge.

Key Question: Take Profit at $1000 or Hold for the Split?

With Netflix nearing the $1000 psychological barrier, investors are at a crossroads: should they lock in profits or hold for a potential stock split?

Option 1: Take Profit at $1000

• Rationale: Taking profit near $1000 allows you to capitalize on the post-earnings momentum and de-risk your portfolio.

• Market Dynamics: Stocks often experience profit-taking after large earnings-driven rallies, which could result in a pullback.

• Trading Strategy: Use trailing stop orders to capture further upside while protecting gains.

Option 2: Hold for a Split

• Rationale: A stock split could attract more retail investors and provide additional upside. Netflix’s recent membership growth and raised guidance enhance the likelihood of such a move.

• Historical Precedent: Stocks like Tesla and Apple saw significant price appreciation post-split announcements.

• Risk Management: Maintain partial exposure while booking some profits to balance upside potential and downside risk.

Trading Strategy #1: Bullish Debit Spread for Limited Risk

Objective: Capitalize on further upside while minimizing risk.

Setup:

• Buy the February 28, 2025 1050 Call

• Sell the February 28, 2025 1100 Call

Rationale:

1. Defined Risk: Limits your maximum loss to the net premium paid.

2. Leveraged Upside: Profits if Netflix continues its rally toward $1100.

3. Short-Term Play: Ideal for traders looking to benefit from immediate post-earnings momentum.

Trading Strategy #2: Straddle for Volatility Play

Objective: Profit from heightened volatility and significant price movement in either direction.

Setup:

• Buy the February 1000 Call

• Buy the February 1000 Put

Rationale:

1. Earnings Momentum: The elevated IV post-earnings makes this strategy attractive for capturing large price swings.

2. Directional Agnosticism: Profits regardless of whether the stock breaks higher or corrects sharply.

3. Exit Plan: Close the position within 1-2 trading sessions to avoid time decay erosion.

Broader Market Implications

Netflix’s blowout results could set a bullish tone for the broader tech sector during this earnings season. Companies with subscription-based models or ad-supported platforms, such as Disney and Roku, may benefit from positive sentiment spillovers. Conversely, weaker peers may face heightened scrutiny.

Conclusion

Netflix’s remarkable Q4 performance offers compelling opportunities for traders and investors alike. Whether you choose to take profit at $1000 or hold for a potential stock split depends on your risk tolerance and market outlook. Strategic options plays like debit spreads and straddles provide effective ways to position for further moves while managing risk.

Stay vigilant and adapt to market conditions—Netflix’s journey to $1000 and beyond could be a defining moment in this earnings season.

Please DYODD.