Underperforming Netflix Stock Braces for Earnings

The stock has struggled to recover from its January post-earnings bear gap

Deputy Editor
Apr 14, 2022 at 2:04 PM
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FAANG name Netflix Inc (NASDAQ:NFLX) has been struggling on the charts lately, apparently still unable to recover from its steep January post-earnings pullback. The stock found a ceiling at the $400 level in late February, which has kept it at a 43.2% year-to-date deficit. Currently down 2.6% to trade at $341.08, the stock isn't too far from its recent March 14 two-year low of $329.82. 

Amid this technical backdrop, Netflix is gearing up for the company's first-quarter earnings report, due out after the close on Tuesday, April 19. Plenty of analysts have chimed in ahead of the event. Most recently, Morgan Stanley lowered its price target to $425 from $450 this morning, while Wedbush said the subscription price hike is to offset the slowing user growth among Western subscribers, which the firm says appears to be reaching a ceiling. 

Netflix's post-earnings history doesn't paint a very pretty picture for the stock. Of the last eight reports, only one next-day session finished positive -- a 16.9% pop in January of 2021. The options pits are pricing in a 9.7% swing this time around, which is bigger than the 8.5% move the stock has averaged over the past two years. 

Despite calls outnumbering puts on an absolute basis, the stock's 50-day put/call volume ratio of 0.79 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits higher than all but 1% of readings in its annual range. This suggests a very healthy appetite for long puts of late.

Meanwhile, short interest has fallen 29.3% during the two most recent reporting periods, and now accounts for just 1.8% of the stock's available float. The lack of apparent tailwinds during this time indicates a potential underlying weakness in the shares. 

 

 

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