Netflix – Technical Chart

October 18, 2021

Netflix Will Crush Earnings

Netflix reports Q3 results on Tuesday and they have been doing EVERYTHING right. This will be a huge topline beat and a push up to 705+ to follow.  I feel they are creating innovative, “outside-the-box” content that is targeting a growing international base of millenial viewers. This targeted approach really hooks when done right.  Squid Game is the current example of this newfound creative judgement.  Netflix may have even invented a theme here that can be built out into future shows.  Other fresh hits like La Casa de Papel, Sex Education, and Never Have I Ever are gaining traction with this important viewer base.  They are attracting viewers vertically which is the new trend in streaming content.

This is an international growth story. With only 76 million of its 209 million subscribers residing in the U.S.  The arc of new subscribers are just beginning to be seen on a global level.  Expect another membership explosion higher, similar to the 205M that was seen into the end of 2020.  The forecast is for third-quarter earnings to be $2.55 per share.  Total revenues are anticipated to be $7.47 billion.  The consensus mark for Q3 revenues is pegged at $7.48 billion, suggesting 16.29% growth from the figure reported in the year-earlier quarter.

Netflix is forecasting it will add 3.5 million paying subscribers but this is super conservative.  New customers surged at the beginning of the pandemic as stay at homers were looking to consume entertainment safely.  As Delta hit and work-from-home became standard, new annual subs likely ripped higher as a result.  Forget the mall, forget the movie theaters, and forget eating out.  Order takeout, stream your favorite show and binge watch. We won’t tell anyone you skipped the gym and rocked pajamas all weekend.
How To Trade it
A pullback ahead of or on the release to 605 to 590 early in the week would be a gift.  Anticipating a move higher to 705 or higher by end of week.  This is an area of high liquidity where LT buyers likely add and new spec trades get taken.  The trade entry here is the 680 weekly calls at 3.30 or lower.

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