Bulls Chasing Netflix Forward of Q1 Earnings: ETFs in Focus

Netflix NFLX is ready to launch first-quarter 2024 outcomes on April 17 after the market shut. It’s price having a look on the fundamentals of the world’s largest video-streaming firm forward of its outcomes.

Netflix shares have risen about 10% thus far this yr, outperforming the broader business and the S&P 500’s decline of 6.1% and eight.4%, respectively. The robust pattern is predicted to proceed if Netflix comes up with an earnings beat.

Picture Supply: Zacks Funding Analysis

Consequently, ETFs with the most important allocation to this streaming big like MicroSectors FANG+ ETN FNGS, Invesco Subsequent Gen Media and Gaming ETF GGME, First Belief Dow Jones Web Index Fund FDN, FT Vest Dow Jones Web & Goal Earnings ETF FDND and Communication Providers Choose Sector SPDR Fund XLC are in focus.

Earnings Whispers

Netflix has an Earnings ESP of -2.23% and a Zacks Rank #3 (Maintain). Based on our methodology, the mixture of a optimistic Earnings ESP and a Zacks Rank #1 (Sturdy Purchase), 2 (Purchase) or 3 will increase the possibilities of an earnings beat. You may uncover one of the best shares to purchase or promote earlier than they’re reported with our Earnings ESP Filter.

The net video-streaming big noticed no earnings estimate revision over the previous 30 days for the to-be-reported quarter. It’s anticipated to report substantial earnings development of 8.7% and income development of 12.5% for the to-be-reported quarter. The corporate’s earnings shock historical past is spectacular, because it delivered an earnings shock of seven.17%, on common, over the previous 4 quarters. Netflix additionally belongs to a top-ranked Zacks business (positioned on the top 28% of 250+ industries).

Netflix, Inc. Worth, Consensus and EPS Shock

Netflix, Inc. price-consensus-eps-surprise-chart | Netflix, Inc. Quote

Analysts Are Bullish Forward of Earnings

Analysts are bullish on Netflix, with a median brokerage suggestion (ABR) of 1.66 made by 43 brokerage corporations. Out of them, 28 are Sturdy Purchase and two are Purchase. Sturdy Purchase and Purchase, respectively, account for 65.12% and 4.65% of all suggestions. The common value goal for Netflix involves $1,074.53, starting from a low of $800.00 to a excessive of $1,494.00.

Many analysts stay optimistic about Netflix’s resilience within the streaming market amid financial tariff-related uncertainties. JP Morgan referred to as Netflix the “most resilient” firm, given the streamer’s robust subscriber base, with members watching a median of two hours of content material per day. Morgan Stanley named Netflix a “high choose,” reflecting its confidence in Netflix’s enterprise mannequin and its skill to navigate an more and more aggressive streaming panorama.

Oppenheimer reiterated its Outperform ranking on Netflix with a goal value of $1,150 — one of many highest on Wall Avenue — forward of its first-quarter earnings. Financial institution of America and Evercore ISI are additionally upbeat on Netflix. (See the Zacks Earnings Calendar to remain forward of market-making information.)

What to Watch?

For the primary quarter, Netflix expects revenues to develop 11.2% yr over yr to $10.42 billion, whereas earnings per share are anticipated to rise 5.7% to $5.58. The ad-supported plan is a significant tailwind for the corporate. Based on Netflix, almost half of recent subscribers are choosing the extra inexpensive, ad-backed tier, fueling consumer development at the same time as the corporate not stories quarterly subscriber additions. Nonetheless, Netflix confirmed it has surpassed 300 million world customers within the first quarter, marking a 16% improve yr over yr.

Promising Outlook

Based on the Wall Avenue Journal, Netflix goals to achieve a market capitalization of $1 trillion by the tip of the last decade, a big leap from its present valuation of roughly $419.2 billion. The corporate plans to double its annual revenues from $39 billion to $80 billion, signaling aggressive development expectations seemingly tied to subscriber growth, content material monetization, and worldwide market growth. Netflix additionally forecasts its world promoting revenues to develop to $9 billion by 2030.

With whole subscribers of greater than 300 million, the corporate goals to extend this subscriber base to roughly 410 million by 2030 by specializing in worldwide markets, corresponding to India and Brazil, for a lot of this growth.

Valuations

Netflix shares look costly at present ranges, with a P/E ratio of 38.00 versus 11.41 for the business. Nonetheless, it has a powerful Progress Rating of B, indicating that it’s primed for extra development. This justifies its excessive valuation. Additionally, Netflix has turn out to be a well-liked defensive play within the present unsteady market.

ETFs in Focus

MicroSectors FANG+ ETN (FNGS)

MicroSectors FANG+ ETN is linked to the efficiency of the NYSE FANG+ Index, which is an equal-dollar-weighted index. It’s designed to supply publicity to a bunch of extremely traded development shares of next-generation expertise and tech-enabled corporations. It holds 10 shares in its basket in equal proportion, with Netflix’s share coming in at 10% (learn: Should You Brace for Mag-7 ETFs Before It’s Too Late?).

MicroSectors FANG+ ETN has accrued $372.8 million in its asset base and expenses 58 bps in annual charges. It trades in a reasonable quantity of 151,000 shares a day on common and has a Zacks ETF Rank #3.

Invesco Subsequent Gen Media and Gaming ETF (GGME)

Invesco Subsequent Gen Media and Gaming ETF provides publicity to corporations with vital publicity to applied sciences or merchandise that contribute to future media by means of direct revenues. It tracks the STOXX World AC NexGen Media Index, holding 85 shares in its basket. Netflix is the highest agency, accounting for 8.7% of the GGME property.

Invesco Subsequent Gen Media and Gaming ETF has amassed $117.2 million in its asset base and expenses 61 bps in annual charges. It trades in a median each day quantity of 16,000 shares and has a Zacks ETF Rank #3.

First Belief Dow Jones Web Index Fund (FDN)

First Belief Dow Jones Web Index Fund follows the Dow Jones Web Composite Index, giving buyers publicity to the broad Web business. It holds about 41 shares in its basket, with Netflix occupying the second spot at 9.5%.

First Belief Dow Jones Web Index Fund is the most well-liked and liquid ETF within the broad expertise house, with AUM of $5.8 billion and a median each day quantity of round 507,000 shares. FDN expenses 51 bps in charges per yr and has a Zacks ETF Rank #1 (Sturdy Purchase) with a Excessive threat outlook.

FT Vest Dow Jones Web & Goal Earnings ETF (FDND)

FT Vest Dow Jones Web & Goal Earnings ETF is an actively managed fund that invests primarily in U.S. exchange-traded fairness securities supposed to trace the Dow Jones Web Composite Index. It makes use of an “choice technique” consisting of writing (promoting) U.S. exchange-traded name choices on the Nasdaq-100 Index or ETFs that monitor the Nasdaq-100 Index. It holds 42 shares in its basket, with Netflix occupying the third place at 9.5% share.

FT Vest Dow Jones Web & Goal Earnings ETF has accrued $4.9 million in its asset base and trades in a median each day quantity of about 6,000 shares. It expenses 75 bps in annual charges.

Communication Providers Choose Sector SPDR Fund (XLC)

Communication Providers Choose Sector SPDR Fund provides publicity to corporations from telecommunication providers, media, leisure and interactive media & providers and has accrued $19.2 billion in its asset base. It follows the Communication Providers Choose Sector Index and holds 23 shares in its basket, with Netflix occupying the fourth place at 6.5% share. About 33% of the portfolio is allotted to interactive media & providers, whereas leisure and media spherical off the subsequent two (learn: Inside Trump Tariffs and Their Impact on Sector ETFs).

Communication Providers Choose Sector SPDR Fund expenses 8 bps in annual charges and trades in a median each day quantity of seven.5 million shares. It has a Zacks ETF Rank #1.