Netflix, Inc. (NFLX) Traders Foresee Post-Earnings Highs

Netflix, Inc. (NFLX) will report earnings tomorrow night


Published on Apr 14, 2015 at 11:49 AM
Updated on Apr 20, 2015 at 5:32 PM

For the second day in a row, Netflix, Inc. (NASDAQ:NFLX) is on the receiving end of bullish brokerage attention. Specifically, Piper Jaffray, Credit Suisse, and SunTrust Robinson raised their respective price targets on the stock to $487, $461, and $480. Meanwhile, ahead of the company's first-quarter earnings report tomorrow night, call options are active.

Diving right in, NFLX calls are crossing at 1.2 times the intraday norm. Seeing potential buy-to-open activity are the April 560, 585, and 610 strikes, suggesting speculators have big short-term expectations for the streaming-video issue. Should the shares settle atop any of those strikes at Friday's close -- when front-month options expire -- it would represent a record high for NFLX.

These traders may be in luck, considering the stock tends to make huge moves following earnings. In the session after the company's late-January report, NFLX surged 17.3%. In fact, over the past eight quarters, the security has averaged a single-session move of 12.9%, subsequent to the quarterly event. Currently, the options market is pricing in a 15% post-earnings move.

Technically speaking, NFLX has been on a tear, up 39.4% year-to-date to trade at $476.29 -- including a 0.3% gain around midday. As such, the equity is within a chip-shot of its September 2014 record peak of $489.29.

Not surprisingly, today's penchant for call buying is par for the course. Netflix, Inc.'s (NASDAQ:NFLX) 10-day call/put volume ratio across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is 1.23 -- higher than 92% of comparable readings from the previous 12 months.

Daily Chart of NFLX since September 2014

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