Netflix (NASDAQ: NFLX) will announce its results after the close of trading in New York on Thursday, 17 July. Analysts forecast the NASDAQ-listed streaming media company to report second-quarter earnings growth of 45%, reaching $7.08 per share, while revenue is expected to increase by 15.6%, amounting to $11.1 billion. Net subscriber additions are predicted to decrease by 42.9%, falling to 4.6 million.
For the third quarter, analysts forecast guidance for revenue of $11.3 billion, up 14.7%, and earnings of $6.68 per share, reflecting growth of 23.6%. The options market is pricing in a 6.4% move, either up or down, in Netflix shares following the earnings report.
The significant expected move in the stock is driven by implied volatility levels for options expiring on 18 July, which were high at nearly 70% as of the 13 July close and are likely to increase further as results approach. Options positioning in Netflix also appears notably bullish, with call delta values surpassing put delta values. This indicates that once the company reports its results and options begin to decrease in value due to the decay of implied volatility, market makers might find themselves overly hedged on the long side, potentially forcing them to sell shares. This scenario could exert downward pressure on the stock if it fails to breach the $1,300 level, which acts as the gamma call wall.
Additionally, technical analysis shows a downside risk for the shares both before and after the results. The Relative Strength Index (RSI) for Netflix has been trending lower and recently dropped below 50, signalling a shift in momentum from bullish to bearish. Furthermore, the stock has broken down from a rising broadening wedge pattern, which is traditionally seen as a bearish reversal signal, indicating a possible decline back towards the pattern’s origin, around $1,100.
Written by Michael J. Kramer, founder of Mott Capital Management.
Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed.
No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction, or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.
For the third quarter, analysts forecast guidance for revenue of $11.3 billion, up 14.7%, and earnings of $6.68 per share, reflecting growth of 23.6%. The options market is pricing in a 6.4% move, either up or down, in Netflix shares following the earnings report.
The significant expected move in the stock is driven by implied volatility levels for options expiring on 18 July, which were high at nearly 70% as of the 13 July close and are likely to increase further as results approach. Options positioning in Netflix also appears notably bullish, with call delta values surpassing put delta values. This indicates that once the company reports its results and options begin to decrease in value due to the decay of implied volatility, market makers might find themselves overly hedged on the long side, potentially forcing them to sell shares. This scenario could exert downward pressure on the stock if it fails to breach the $1,300 level, which acts as the gamma call wall.
Additionally, technical analysis shows a downside risk for the shares both before and after the results. The Relative Strength Index (RSI) for Netflix has been trending lower and recently dropped below 50, signalling a shift in momentum from bullish to bearish. Furthermore, the stock has broken down from a rising broadening wedge pattern, which is traditionally seen as a bearish reversal signal, indicating a possible decline back towards the pattern’s origin, around $1,100.
Written by Michael J. Kramer, founder of Mott Capital Management.
Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed.
No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction, or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.
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