Pre-Earnings Option Bulls Flock to Netflix, Inc. (NFLX)

The brokerage bunch is divided on Netflix, Inc. (NFLX)

by Alex Eppstein

Published on Jan 20, 2015 at 10:42 AM
Updated on Apr 20, 2015 at 5:32 PM

Netflix, Inc. (NASDAQ:NFLX) is slated to step into the earnings confessional tonight, and ahead of this event, sentiment is mixed. On the one hand, options traders have displayed optimism toward the streaming content provider; on the other, the brokerage bunch is split in its collective outlook on the shares.

Diving right in, NFLX boasts a 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 1.08. This indicates option buyers have preferred calls over puts in recent months. More significantly, the ratio outstrips 96% of all comparable readings from the previous year, suggesting a much healthier-than-usual appetite for bullish bets over bearish.

However, as alluded to earlier, the brokerage crowd isn't nearly as sanguine toward NFLX. Of the 30 analysts following the stock, 15 have doled out "buy" or better recommendations, while the other 15 have handed out "hold" or worse ratings.

Technically speaking, NFLX has been less than impressive over the long term. Currently sitting at $336.88, the equity has advanced just 2.5% on a year-over-year basis.

Additional losses could be in store following tonight's trip under the earnings spotlight. In the session following last October's report, NFLX lost 19.4%. More volatility could be in store tonight, with the options market pricing in a one-day post-earnings swing of 10.6%. That seems about right, historically speaking, as the shares have averaged a single-session move of 16% following the company's last eight quarterly reports.

In other news, Amazon.com, Inc. (NASDAQ:AMZN) upped the ante in its rivalry with Netflix, Inc. (NASDAQ:NFLX). The former announced plans to push further into the original content space with its Amazon Original Movies initiative.


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