3 Things Netflix Will Need to Get Right Next Week

Key Points

• Netflix hit an all-time high two weeks ago, heading into Thursday afternoon's crucial quarterly update.

• The stock has moved higher the day after reporting earnings in each of the last three quarters.

• With an analyst downgrading the stock earlier this week on valuation concerns, Netflix will need to do more than put out a modest "beat and raise" performance.

• 10 stocks we like better than Netflix ›

Earnings season unofficially kicks off next week. Financial stocks are typically the first to step up with their latest quarterly results, but Netflix (NASDAQ: NFLX) is also hoping to make a splash with its update. The world's leading premium video streaming service will announce its second-quarter report after the market close on Thursday.

There is a lot at stake here for Netflix and its investors. The shares are rolling right now. Netflix stock is up 40% in 2025, rising 82% over the past year. It's going to need to do more than just check off the right boxes.

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Let's take a look at some of the things that the one of the market's best stocks over the past two decades will need to get right on Thursday.

1. Winning streaks need to continue

Expectations are reasonable heading into the telltale update. Analysts see revenue rising 15% to $11.04 billion. They are modeling $7.06 a share in earnings, a 45% year-over-year jump.

Double-digit percentage gains are good, and it's great to see the bottom line outpacing the top. I'm only tagging it as "reasonable" because it's in line with the guidance for $11.035 billion in revenue and $7.03 in earnings per share that Netflix itself offered three months ago.

Reality will have to be better than just a marginal step up from the company's own outlook. Netflix has consistently exceeded market expectations over the past year. Guidance has been either boosted or encouraging. The shares have moved higher on the trading day following its earnings release in each of the last three quarters:

• April 21, 2025: Up 2%
• Jan. 22, 2025: Up 10%
• Oct. 18, 2025: Up 11%

It's an average jump of nearly 8%, but there's an even longer winning streak in play here. Netflix has now moved higher between earnings season -- every time -- since the third quarter of 2023. Take a close look at this three-year chart.

Data source: YCharts.

Don't let the dazzling six-bagger performance in that three-year run distract you. Check out the last half of the chart, and how every E -- marking the day that Netflix posted its results -- is higher than the one before. Unless the stock plummets ahead of Thursday's update, it will be seven consecutive quarters of Netflix moving higher between quarterly reports.

2. Rattle analysts out of their slumber

The downside to any meteoric run is that the fundamentals often don't match the spike. The stock has come through with a sixfold advance over the past three years, but profitability has merely doubled. Trailing revenue is up by roughly a third from where it was three years ago.

Wall Street pros are starting to grow cautious. As many analysts have lowered their profit targets over the past month -- for the second quarter that Netflix will announce, and the third quarter that just started -- as those that have raised them. There was even an analyst downgrade on Monday.

David Joyce at Seaport Research downgraded the shares from buy to neutral. Valuation is the primary concern, as Joyce sees just 10% of upside in the shares from where they are now. You don't like to see analyst opinions sour heading into a critical financial update.

Thankfully, that was the only downgrade this week. At least five analysts have revised their price targets higher on Netflix over the final three trading days of this week. Now that is what you like to see ahead of a quarterly report.

Unfortunately, most of these upticks are modest compared to where the shares are now. Wall Street pros are simply catching up to the upticks. Netflix will need something good to excite analysts beyond a modest beat and upbeat guidance.

Image source: Getty Images.

3. A stock split would be nice

It's been 10 years since Netflix announced a stock split. That 7-for-1 stock split happened this month back in 2015. Its only other split happened 11 years before that. With the stock's torrid run since its last split decision, it wouldn't hurt to revisit the practice, especially if Netflix feels that it has a strong report on its hands.

There are only 11 U.S. exchange-listed stock with higher price points than Netflix, and only one of them has a higher market cap. It's true that a split is a zero-sum game. We live in a time when buying fractional shares is easy.

Netflix probably doesn't care about inclusion in price-weighted indices. It probably hasn't given a second thought to the high price concerns of small options traders. The stock's huge rally despite a four-figure price tag is proof that you don't need a small price to make big gains.

However, it has to be a psychological burden to offer a streaming service at an accessible price point when your stock price is so high. There's a reason why many of the companies with chunkier stock prices aren't consumer-facing businesses. Netflix seems due for a stock split, and another blowout performance on Thursday would be the right time in the right lane to smack the seven and 10 pins down with a single bowling ball.

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Rick Munarriz has positions in Netflix. The Motley Fool has positions in and recommends Netflix. The Motley Fool has a disclosure policy.