Netflix NFLX is set to release fourth-quarter 2024 results on Jan. 21 after market close. It is worth taking a look at the fundamentals of the world’s largest video-streaming company ahead of its results.
See the Zacks Earnings Calendar to stay ahead of market-making news.
Netflix shares have risen 11% in the past three months, outperforming the broader industry’s rise of 5.5% in the same time frame. The strong trend will likely continue, given that Netflix has a reasonable chance to beat this earnings season.
Zacks Investment Research
Image Source: Zacks Investment Research
As a result, ETFs with the largest allocation to this streaming giant like MicroSectors FANG+ ETN FNGS, Invesco Next Gen Media and Gaming ETF GGME, First Trust Dow Jones Internet Index Fund FDN, FT Vest Dow Jones Internet & Target Income ETF FDND and Communication Services Select Sector SPDR Fund XLC are in focus.
Netflix has an Earnings ESP of +0.19% and a Zacks Rank #3 (Hold). According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The online video-streaming giant saw negative earnings estimate revision of a penny over the past seven days for the to-be-reported quarter. However, Netflix is expected to report solid earnings growth of 98.6% and substantial revenue growth of 14.5% for the to-be-reported quarter. The company’s earnings surprise history is impressive, as it delivered an earnings surprise of 5.73%, on average, over the past four quarters. Netflix also belongs to a top-ranked Zacks industry (placed at the top 16% of 250+ industries).
Netflix, Inc. Price, Consensus and EPS Surprise
Netflix, Inc. price-consensus-eps-surprise-chart | Netflix, Inc. Quote
Analysts are bullish on Netflix, with an average brokerage recommendation (ABR) of 1.91 made by 41 brokerage firms. Out of them, 23 are Strong Buy and two are Buy. Strong Buy and Buy, respectively, account for 56.1% and 4.88% of all recommendations. The average price target for Netflix comes to $889.81, ranging range from a low of $650.00 to a high of $1,100.00. Over the past week, one analyst, BMO Capital, raised the price target on Netflix to $1,000 from $825 while maintaining an Outperform rating, signaling confidence in the company’s future performance.
The streaming giant expects fourth-quarter revenues to grow 15% year over year. Netflix expects higher subscriber additions in the fourth quarter compared to last year due to a strong content slate. Bloomberg Intelligence expects fourth-quarter subscriber additions to double from the third quarter, given the release of the content, including live NFL games and “Squid Game” Season 2.
For the full year, revenues are expected to grow at the higher end of the previous 14-15% year-over-year growth guidance.
Netflix shares look expensive at current levels, with a P/E ratio of 36.70 versus 10.86 for the industry. However, it has a strong Growth Score of A, indicating that it is primed for more growth. This justifies its high valuation.
MicroSectors FANG+ ETN (FNGS)
MicroSectors FANG+ ETN is linked to the performance of the NYSE FANG+ Index, which is an equal-dollar-weighted index. It is designed to provide exposure to a group of highly traded growth stocks of next-generation technology and tech-enabled companies. It holds 10 stocks in its basket in equal proportion, with Netflix’s share coming in at 10% (read: Can “Magnificent Seven” ETFs Retain Their Glory in 2025?).
MicroSectors FANG+ ETN has accumulated $427.9 million in its asset base and charges 58 bps in annual fees. It trades in a moderate volume of 121,000 shares a day on average and has a Zacks ETF Rank #3.
Invesco Next Gen Media and Gaming ETF (GGME)
Invesco Next Gen Media and Gaming ETF offers exposure to companies with significant exposure to technologies or products that contribute to future media through direct revenues. It tracks the STOXX World AC NexGen Media Index, holding 87 stocks in its basket. Netflix is the fourth firm, accounting for 7.7% of the GGME assets.
Invesco Next Gen Media and Gaming ETF has amassed $34.3 million in its asset base and charges 61 bps in annual fees. It trades in average daily volume of 6,000 shares and has a Zacks ETF Rank #3.
First Trust Dow Jones Internet Index Fund (FDN)
First Trust Dow Jones Internet Index Fund follows the Dow Jones Internet Composite Index, giving investors exposure to the broad Internet industry. It holds about 41 stocks in its basket, with Netflix occupying the third spot at 7.6%.
First Trust Dow Jones Internet Index Fund is the most popular and liquid ETF in the broad technology space, with AUM of $6.7 billion and an average daily volume of around 366,000 shares. FDN charges 51 bps in fees per year and has a Zacks ETF Rank #1 with a High risk outlook (read: 4 Best-Performing ETF Areas of Q4 That Still Show Promise).
FT Vest Dow Jones Internet & Target Income ETF (FDND)
FT Vest Dow Jones Internet & Target Income ETF is an actively managed fund that invests primarily in U.S. exchange-traded equity securities intended to track the Dow Jones Internet Composite Index. It utlizes an “option strategy” consisting of writing (selling) U.S. exchange-traded call options on the Nasdaq-100 Index, or ETFs that track the Nasdaq-100 Index. It holds 42 stocks in its basket, with Netflix occupying the third position at 7.65 share.
FT Vest Dow Jones Internet & Target Income ETF has accumulated $2.3 million in its asset base and trades in an average daily volume of about 2,000 shares. It charges 75 bps in annual fees.
Communication Services Select Sector SPDR Fund (XLC)
Communication Services Select Sector SPDR Fund offers exposure to companies from telecommunication services, media, entertainment and interactive media & services and has accumulated $20.5 billion in its asset base. It follows the Communication Services Select Sector Index and holds 22 stocks in its basket, with Netflix occupying the fourth position at 6.4% share. About 41% of the portfolio is allocated to interactive media & services, while entertainment and media round off the next two.
Communication Services Select Sector SPDR Fund charges 9 bps in annual fees and trades in an average daily volume of 4 million shares. It has a Zacks ETF Rank #1.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
