Analysts Cut Netflix Price Targets Ahead of Earnings

Netflix will report earnings after tomorrow's close

Oct 15, 2018 at 10:11 AM
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Netflix, Inc. (NASDAQ:NFLX) is scheduled to report its third-quarter results after the market closes tomorrow, Oct. 16, marking the start of FAANG earnings. Ahead of the highly anticipated event, NFLX stock received a round of bearish brokerage notes -- sending the shares down 1.7% this morning to trade at $333.70.

Specifically, Raymond James cut its Netflix price target to $400 from $445, saying rising interest rates could stall growth for the streaming giant. Goldman Sachs, meanwhile, waxed optimistic about the company's earnings potential, but said broad-market headwinds could weigh on the stock in the near term. The brokerage firm lowered its price target on NFLX by $40 to $430.

Widening the scope reveals most analysts are upbeat toward NFLX stock -- a sentiment shared among options traders. The equity's Schaeffer's put/call open interest ratio (SOIR) of 0.86 ranks in the 17th percentile of its annual range, meaning short-term traders are more call-heavy than usual toward Netflix.

Ahead of earnings, short-term options are pricing in elevated volatility expectations, too, per the stock's 30-day at-the-money implied volatility (IV) of 60.6%, which registers in the 98th annual percentile. Meanwhile, Netflix stock's 30-day IV skew of 13.7% ranks in the 96th percentile of its 12-month range, indicating near-term calls are cheaper than their put counterparts, from a volatility perspective.

Looking at the charts, it's been a rough stretch for NFLX, which has sold off alongside the broader tech sector this month. Since its Oct. 2 peak at $386.80, the FAANG stock is down 14.7%. This pullback stalled atop the security's 200-day moving average last week, a trendline that's ushered the shares higher since September 2016.

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