Netflix Subscriber Loss Not as Bad as Anticipated

Analyst coverage following the streaming giant's earnings is mixed

Digital Content Manager
Jul 20, 2022 at 10:03 AM
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The shares of Netflix Inc (NASDAQ:NFLX) are up 2% at $205.56 this morning, after the streaming service surprised Wall Street with a generally upbeat second-quarter earnings report. The company posted earnings of $3.20 per share, beating analysts' estimates. Though its revenue for the quarter missed expectations, the firm's subscriber loss of 970,000 users wasn't nearly as bad as the 2 million it projected last quarter. What's more, Netflix forecasts subscriber growth of 1 million users in the upcoming quarter. 

Analysts are already chiming in, though sentiment is mixed. No less than five brokerages lifted their price targets, including Stifel, which hiked its objective to $250 and upgraded the stock to a "buy" from a "hold." Meanwhile, Jefferies and Deutsche Bank both slashed their price targets to $243 and $270, respectively. 

When we last checked on Netflix in mid-June, the stock was stumbling over a downgrade from Goldman Sachs. Many members of the brokerage bunch were echoing this bearish sentiment heading into today, with 20 analysts at a "hold," compared to six "sell" or worse ratings, and just six "strong buy" recommendations. 

Puts are outnumbering calls during today's trading. Within the first half hour of Wednesday's session, 105,000 calls and 123,000 puts have been exchanged, which is nine times the intraday average. The most popular position is the weekly 7/22 200-strike put, followed by the 210-strike call in the same series, with positions being opened at both contracts. 

More broadly, options traders have adopted a pessimistic stance. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security sports a 10-day put/call volume ratio of 1.17, which sits higher than all other readings from the past year. In other words, puts haven't been more popular during this time period. 

Since its mid-April bear gap, things have been rough for NFLX from a technical standpoint. The security has consolidated below the $205.50 region for months now, though it could close back above this level for the first time since April 25, should these gains hold. Year-to-date, the security suffers a 66.2% deficit. 

 

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