This Week’s “Sleeper” Earnings Stock

It’s not like it’s a stock nobody has heard of, it’s a “sneaker” for a completely different reason… Nobody is talking about it.

The stock is Netflix (NFLX), and the company reports their earnings after the close on Thursday. We’re hearing all about the banks and a few other groups, but mum’s the word on Netflix.

Here’s why it’s at the top of my list.

Last quarter, Netflix delivered mixed earnings results.

The company beat analyst’s revenue expectations as the continued shift to an advertising model has been working.

Earnings per share (EPS) were below The Street’s expectations by $0.11.

Netflix shares ripped higher, despite the mixed report.

The reason?

Management’s outlook. The company’s management increased their outlook for the next quarter as well as the fiscal year. Improving margins from cost-cutting efforts in 2023 are now trickling to the bottom line.

Netflix shares are now 30% higher than they were in the moments before the earnings report, but has Wall Street changed their opinion on the stock?

Nope. That’s why it’s still a sleeper.

Since Netflix’s earnings, there have been 30 “notes” from Wall Street analysts.

  • Two analysts upgraded the stock
  • Two analysts downgraded the stock
  • 26 analysts reiterated their outlook, many of them “neutral” on the shares.

There’s your opportunity.

Almost half of the analyst community has a “hold” or a “sell” on Netflix. They all ran from the stock during its 77% drop that started in late 2021. The stock is now a paltry 11% away from its all-time highs, and many analysts are still holding off on buying the shares.

nflx stock chart

From a fundamental perspective, the streaming space is heading for a contraction. You and I went from having cable to having cable and Netflix to having 15 different streaming services that now cost more than cable!

That’s going to change, and Netflix is making the moves that indicate it’s going to be one of the last streamers standing.

Here’s How This One Plays Out

Netflix is rolling into their earnings report as a relatively “under-loved” stock.

Shares have been a relative strength leader in the Nasdaq 100 for the last year, having returned 85% over that period.

Despite the performance, both fundamentally and technically, analysts and investors have yet to consider it a long-term holding.

Another positive earnings report this week would be the catalyst for many of these investors to move from the sidelines to push Netflix to new all-time highs.

I’m looking for some resistance at those highs ($700) followed by another round of buying that would propel the stock towards $800 over the long term.

Support for Netflix sits at $570, about 10% below current prices.

About the Author

Chris Johnson (“CJ”), a seasoned equity and options analyst with nearly 30 years of experience, is celebrated for his quantitative expertise in quantifying investors’ sentiment to navigate Wall Street with a deeply rooted technical and contrarian trading style.

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