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How might Netflix’s Q4 earnings affect its share price?

How might Netflix’s Q4 earnings affect its share price?

Netflix’s global base of subscribers is widely expected to have crossed the 200-million milestone by the end of 2020. That would be equivalent to the entire US population in the 1960s, or about the size of Nigeria’s current population.

While we await the confirmation of such numbers from Netflix, which is set to announce its Q4 results after US markets close on Tuesday ...

note that a lot of the tailwinds for this pandemic darling has already been baked into its share prices.

How might Netflix’s Q4 earnings affect its share price?

How have Netflix’s share prices performed so far in 2021?

In fact, its stock prices have dropped by 7.9 percent so far this year, and is still keeping to the same range since July. Though to be fair to the bulls, Netflix’s shares had a remarkable year in 2020, registering an annual advance of 67.1 percent.

Still, with its 50-day and 100-day simple moving averages (SMA) now flat, Netflix’s shares are clearly in need of a new major catalyst to break out of its sideways trend.

Are the best days over for Netflix’s growth?

The forward-looking nature of the markets mean that Netflix shareholders have already trained their sights on this year’s prospects and beyond.

Some market estimates see Netflix boasting 300 million subscribers by 2024, but will have to first overcome near-term challenges.

Netflix is likely to post subdued year-on-year comparisons in 2021, given that the pandemic had front-loaded much of the company’s growth in the first half of 2020. It’s difficult to imagine Netflix repeating or beating such a feat during this current quarter and next.

For example, the streaming giant added 15.8 million subscribers in Q1 2020. According to the Bloomberg consensus estimates, Netflix is expected to add “only” 7 million more subscribers in the current quarter, which would be less than half of the total added in the first three months of 2020.

What are Netflix’s plans for this year?

Amid plans to grow its global subscribers base, Netflix also has to keep its ever-demanding customers satiated. With such a goal in mind, the streaming giant is set to release 70 original films in 2021 (that’s more than one new title for every week), and that doesn’t include documentaries.

It remains to be seen how much this lineup of new titles can add to Netflix’s subscribers tally, given the tempting offerings by the likes of Disney , HBO Max, Peacock and the like, all of whom are vying for a larger share of the streaming pie.

How do Netflix's shares tend to react after earnings releases?

Markets are already pricing in a 6.8 percent one-day move when Netflix shares resume trading after its earnings release.

Also note that shareholders have seized the opportunity to book profits after the last four consecutive earnings announcements, while single-day declines have been registered after 8 out of the past 12 earnings announcements.

Netflix bulls are going to need an outsized positive surprise on Tuesday, or a very bullish outlook from the company’s top brass that markets can buy into. Such rhetoric may put Netflix shares on a path towards breaking past the upper limits of its 7-month long range and potentially set a new record high.


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

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