Netflix stock price pulled back this month as investors waited for the upcoming earnings. NFLX retreated to a low of $1,260 on Monday, down from the year-to-date high of $1,340. So, how will the stock perform after its closely-watched quarterly earnings?
Netflix has won the streaming race
Netflix stock price has surged this year, becoming one of the best-performing players in the Magnificent 7. This performance happened as the company won the streaming race, with most of its competitors facing major challenges.
Its platform has added over 301 million subscribers from around the world, and its business has become highly profitable.
Data compiled by SeekingAlpha shows that its revenue growth has been strong in the past few years. Its annual figure rose from over $24.9 billion in 2019 to $39 billion last year.
Most importantly, the company has continued to grow its profitability in the past few years. Its annual profit jumped from $2.7 billion in 2020 to over $9.2 billion in the trailing twelve months (TTM).
This revenue growth was due to the increased number of users and the introduction of new monetization methods for its content. For example, it has become one of the fastest-growing advertisers in the industry.
Read more: Netflix stock price analysis: short-term retreat to $1,060 likely
NFLX earnings ahead
The next key catalyst for the Netflix stock price will be its earnings, which will come out on Thursday. Analysts anticipate the results to show that its revenue jumped by 15.4% in the second quarter to $11 billion. The most optimistic analyst sees the revenue coming in at $11.2 billion.
Analysts also expect that Netflix’s profitability surged in the last quarter. The average estimate is that its earnings per share (EPS) rose from $4.88 in Q2’24 to $7.06 in Q2’25. There are chances that Netflix’s results will be much better than expected as the company has a long record of beating analysts estimates.
Netflix stock price will also react to its forward guidance for the third quarter and full year. The expectation is that its third-quarter revenue will be $11.2 billion, while its EPS will grow to $6.63.
A key issue among analysts is that Netflix stock has become highly overvalued, which may lead to a pullback, especially if the forward guidance is not all that strong. Its forward price-to-earnings ratio is 58, much higher than the sector median of 20.
Similarly, the forward EV-to-EBITDA of 38 is also higher than the industry median of 8, while the forward price-to-cash flow of 58 is also higher than the sector median.
Further, the current Netflix stock price of $1,260 is higher than the average analyst’s forecast of $1,175. Therefore, these numbers mean that Netflix has a high bar when it publishes its earnings this week.
Netflix stock price technical analysis
NFLX stock chart | Source: TradingView
The daily chart shows that the NFLX share price has been in a strong bull run in the past few months. This rally happened as the company won the streaming war and became one of the top trade war survivors.
The stock has moved slightly below the lower side of the ascending channel. Also, the two lines of the MACD have formed a bearish crossover. The Relative Strength Index (RSI) has pointed downwards and moved below the neutral point at 50.
Netflix stock price has remained above the 50-day moving average. Therefore, the Netflix stock price outlook is neutral. Weak financial results will push it to the 50-day moving average at $1,200. Strong earnings will push it to the year-to-date high of $1,340.
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