Stock Market News – Netflix in the spotlight ahead of quarterly earnings; other big names in line
July 16, 2018 3:26 pm
Netflix’s Q2 2018 earnings report will be hitting the markets after Monday’s US market close. The consensus recommendation for the company is “buy”, matching the average consensus recommendation for the Online Services peer group.
The provider of subscription-based streaming services is forecast to have made $0.79 in earnings per share (EPS) during the quarter ending in June, according to analysts submitting their projections to Thomson Reuters’ estimate system (the Institutional Brokers’ Estimate System – I/B/E/S). Earnings estimates have fallen from $0.80 per share over the last four weeks. Still, if the numbers confirm the $0.79 figure, this would represent an increase of more than 425% relative to the corresponding quarter from last year when the firm earned $0.15 per share. Meanwhile, analysts’ EPS forecasts range from $0.71 to $0.85. For the record, in the four previously reported quarters, the company’s earnings surprised negatively once, while they came in line with expectations in the remaining three.
A positive earnings surprise could spur long positions on the entertainment company’s stock price. A conclusive break above the $400 handle, which may hold psychological significance, would turn the attention to the region around the all-time high of $423.21 recorded on June 21 for additional resistance. Conversely, disappointing quarterly results may exert selling pressure on the stock, with support possibly occurring around the current level of the 50-day moving average line at $369.48. Further below, the area around the $340 mark which resisted a break to the upside in previous months may be of importance, this time providing support; notice that the zone around this point also encapsulates the 100-day MA at $338.67. Larger deviations between projected and actual results have greater potential to bring into scope support/resistance levels that are further away from where price action currently takes place, as they’re more likely to lead to a more “fierce” market reaction.
Technically, the medium-term outlook for the corporation’s shares is bullish, with trading activity taking place above the 50- and 100-day moving average lines. The short-term picture has deteriorated after Friday’s 8.3% tumble, as evidenced by the falling RSI as well.
The fall at the end of last week came on the back of investor jitters over the corporation’s upcoming earnings release. Such concerns were fueled by a warning coming from analysts at Deutsche Bank, saying the firm could miss subscriber growth numbers, as well as UBS downgrading Netflix’s stock to “neutral” from “buy” on Thursday. Still, despite the falling sentiment, today’s results have the capacity to shift the near-term momentum in either direction. Moreover, the recent fall does little, at least at the moment, to dent the impressive run the shares have had so far in 2018. Specifically, Netflix is trading higher by 105.4% year-to-date, rendering itself the second best performing stock within the S&P 500 behind medical implant device manufacturer Abiomed. For perspective, the S&P’s equivalent performance is at +4.8%.
Subscriber growth, which was briefly mentioned above, will also be instrumental for the direction in Netflix’s shares beyond the earnings number; in reality, the two are interconnected. In particular, Wall Street analysts are expecting Q2 total subscriber net additions of 1.21 million in the US and 5.06mn from overseas markets, according to the average of seven estimates compiled by Bloomberg News. Netflix’s forecasts released around mid-April stood at 1.2mn and 5mn correspondingly. Also attracting attention, will be the revenues figure – expected at $3.94 billion – and management’s guidance for Q3.
From a price-to earnings valuation perspective, the corporation’s forward P/E ratio (price over forecasted earnings) exceeds 100 as seen from the following chart, and is much higher than the respective number for its sector and the market overall. Netflix’s P/E might be a testament of its strong growth potential or a signal of an overpriced stock (or a combination of the two). Such a high P/E may also suggest the existence of asymmetric risks as quarterly results go public later in the day; disappointing figures may lead to a much more profound decline as market participants increasingly challenge the company’s valuation compared to the rise the corporation’s share may experience in the event of a data beat.
Netflix also comprises the Nasdaq 100 (+15.2% in the year-to-date) and it is the benchmark’s lead gainer so far in 2018 (as previously stated, Netflix’s year-to-date performance is at +105.4%).
Some of the big names releasing quarterly results as the week unfolds are Goldman Sachs and Johnson & Johnson on Tuesday, American Express, Alcoa, eBay, IBM and Morgan Stanley on Wednesday, Microsoft and Phillip Morris on Thursday, and General Electric and Honeywell International on Friday.
Netflix’s Q2 2018 earnings report will be hitting the markets after Monday’s US market close. The consensus recommendation for the company is “buy”, matching the average consensus recommendation for the Online Services peer group.
The provider of subscription-based streaming services is forecast to have made $0.79 in earnings per share (EPS) during the quarter ending in June, according to analysts submitting their projections to Thomson Reuters’ estimate system (the Institutional Brokers’ Estimate System – I/B/E/S). Earnings estimates have fallen from $0.80 per share over the last four weeks. Still, if the numbers confirm the $0.79 figure, this would represent an increase of more than 425% relative to the corresponding quarter from last year when the firm earned $0.15 per share. Meanwhile, analysts’ EPS forecasts range from $0.71 to $0.85. For the record, in the four previously reported quarters, the company’s earnings surprised negatively once, while they came in line with expectations in the remaining three.
A positive earnings surprise could spur long positions on the entertainment company’s stock price. A conclusive break above the $400 handle, which may hold psychological significance, would turn the attention to the region around the all-time high of $423.21 recorded on June 21 for additional resistance. Conversely, disappointing quarterly results may exert selling pressure on the stock, with support possibly occurring around the current level of the 50-day moving average line at $369.48. Further below, the area around the $340 mark which resisted a break to the upside in previous months may be of importance, this time providing support; notice that the zone around this point also encapsulates the 100-day MA at $338.67. Larger deviations between projected and actual results have greater potential to bring into scope support/resistance levels that are further away from where price action currently takes place, as they’re more likely to lead to a more “fierce” market reaction.
Technically, the medium-term outlook for the corporation’s shares is bullish, with trading activity taking place above the 50- and 100-day moving average lines. The short-term picture has deteriorated after Friday’s 8.3% tumble, as evidenced by the falling RSI as well.
The fall at the end of last week came on the back of investor jitters over the corporation’s upcoming earnings release. Such concerns were fueled by a warning coming from analysts at Deutsche Bank, saying the firm could miss subscriber growth numbers, as well as UBS downgrading Netflix’s stock to “neutral” from “buy” on Thursday. Still, despite the falling sentiment, today’s results have the capacity to shift the near-term momentum in either direction. Moreover, the recent fall does little, at least at the moment, to dent the impressive run the shares have had so far in 2018. Specifically, Netflix is trading higher by 105.4% year-to-date, rendering itself the second best performing stock within the S&P 500 behind medical implant device manufacturer Abiomed. For perspective, the S&P’s equivalent performance is at +4.8%.
Subscriber growth, which was briefly mentioned above, will also be instrumental for the direction in Netflix’s shares beyond the earnings number; in reality, the two are interconnected. In particular, Wall Street analysts are expecting Q2 total subscriber net additions of 1.21 million in the US and 5.06mn from overseas markets, according to the average of seven estimates compiled by Bloomberg News. Netflix’s forecasts released around mid-April stood at 1.2mn and 5mn correspondingly. Also attracting attention, will be the revenues figure – expected at $3.94 billion – and management’s guidance for Q3.
From a price-to earnings valuation perspective, the corporation’s forward P/E ratio (price over forecasted earnings) exceeds 100 as seen from the following chart, and is much higher than the respective number for its sector and the market overall. Netflix’s P/E might be a testament of its strong growth potential or a signal of an overpriced stock (or a combination of the two). Such a high P/E may also suggest the existence of asymmetric risks as quarterly results go public later in the day; disappointing figures may lead to a much more profound decline as market participants increasingly challenge the company’s valuation compared to the rise the corporation’s share may experience in the event of a data beat.
Netflix also comprises the Nasdaq 100 (+15.2% in the year-to-date) and it is the benchmark’s lead gainer so far in 2018 (as previously stated, Netflix’s year-to-date performance is at +105.4%).
Some of the big names releasing quarterly results as the week unfolds are Goldman Sachs and Johnson & Johnson on Tuesday, American Express, Alcoa, eBay, IBM and Morgan Stanley on Wednesday, Microsoft and Phillip Morris on Thursday, and General Electric and Honeywell International on Friday.
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