How I Look At Netflix (NFLX) Earnings Release (19 Jul Post)
$Netflix (NFLX.US)$ is scheduled to release its Q2 earnings on 19 Jul after market close. I believe the news where market is expecting subscriptions to drop because of password-sharing crackdown, Netflix actually have their subscription increase.
This should reflect well in this Q2 earnings report. I will also be looking forward to a positve guidance and also more innovative plan from Netflix.
In this article I shall examine how Netflix share price has moved during its earning report release and how it has been trading using technical analysis both in Q1 earnings and upcoming Q2 earnings.
Netflix Earnings Data
The EPS forecast this time is $2.85 which is less than Q1 forecast and actual EPS which is 2.85/2.86. Does this mean that market is expecting Netflix revenue to increase but operating expenses to increase?
I believe the increase in subscription due to the password-sharing crackdown would contribute significantly to its revenue earnings, cost or expense should remain the same.
I would be looking for more insights on how Netflix has benefitted from the password-sharing crackdown in the earnings call.
Netflix Earnings History
Netflix Q1 EPS has beat estimate by a small margin (2.86 to 2.88) but the share price did drop by around 3%.
But why do that happen when EPS is better but share price drop. I shall share more in the later section using technical analysis.
Netflix Price Change
There was more than 3% drop in price 1 day after the earnings release. If we look closely at how Netflix price have moved during its earnings release.
Most of them have been positive after its earning report release. I will be sharing later in the Technical Analysis on why Jan and Apr is different.
Netflix Investors Sentiment and Holdings
Investors are positive for Netflix and we can see that investors are increasing their holdings both in last 7 days and 30 days.
This would mean that investors are confident that Netflix price would move higher despite seeing a price drop after its Q1 earnings report.
Technical Analysis - Average Directional Index (ADX)
ADX currently is above 40 which indicate a Strong trend, with its +DI above -DI by a wide margin suggest that it is on a bullish upward movement.
Let us go back to last April which is about 70 period away, as you can see ADX is below 20 which indicate a weak trend, and -DI is above +Di suggest a bearish downward movement.
This might explain why there is a price drop despite a better than estimate EPS result.
Technical Analysis - Parabolic SAR (SAR)
Similarly, if you notice that just before its Q1 earnings on 18 April, there was a bearish reversal and it actually cause a dip in its share price after earnings.
But Netflix just have a bullish reversal near end of June and it has been trending bullish upward with Strong strength.
Summary
From the data I have share and with the technical analysis to give us a clearer picture, I believe we can expect Netflix to post a much better EPS than estimate.
This is how I would be monitoring the Netflix price movement and ADX and SAR is showing that Netflix price is currently strong and in a bullish upward trend.
My target entry price would between $475 to $480, expect it to trend a bit downwards on 19 Jul trading. I would not trade if the price goes below $470.
Appreciate if you could share your thoughts in the comment section whether you think Netflix EPS would beat forecast by wide margin and will Netflix continue its bullish trend after its Q2 earning?
Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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