Netflix Earnings Loom: Can Momentum Sustain?

Earnings season is just a few days away from shifting into a much higher gear following the big banks’ results on Friday, but the reality remains that the Q2 earnings cycle has already begun, with several companies already delivering their results. We count these results as part of our broader Q2 tally.   

And on the docket this week is none other than entertainment giant Netflix NFLX, whose scorching-hot share performance has seemingly been overlooked amid the AI frenzy. Up 90% over the last year, the stock has outperformed not just the broader market but each of the Mag 7 members overall, a reflection of its resiliency.

Let’s take a closer look at expectations for the entertainment favorite.

Netflix Remains Resilient

Strong quarterly results have led to NFLX’s surge over the past year, with the reaffirmation of FY25 guidance in its latest print going a long way in alleviating investors.

Analysts have been bullish concerning the upcoming print, with the current $7.05 Zacks Consensus EPS estimate up 13% over the last several months and suggesting 44% growth year-over-year.

While no upward revisions have hit the tape over the last several weeks, the stability here is the greater takeaway, particularly so amid the economically sensitive environment we’ve found ourselves in.

Sales expectations have largely followed the same path, with the $11.0 billion in sales expected suggesting a 15% climb year-over-year. Below is a chart illustrating the EPS revisions for NFLX’s upcoming release.

Continued subscriber growth has overall been the main positive driving force for Netflix, with the company losing subscribers (on a YoY basis) just once over its last 12 quarters. The ad-supported tiers were a big surprise given Netflix’s popularity for being ad-free, but the success of the implementation has opened an avenue for growth through digital advertising.

A big crackdown on password sharing has also unlocked many obvious benefits as the company looks to capture revenue from viewers who were sharing subscriptions.

The company’s efficiency over recent years has also been a huge tailwind, with the company’s margins expanding nicely. Please note that the chart below calculates values on a trailing twelve-month basis.

It’s worth noting that shares are heading into the print demanding a hefty premium, unsurprising given its recent high-growth nature. The current forward 12-month earnings multiple works out to 43.9X, well above the 33.8X five-year median and reflecting a steep 94% premium relative to the S&P 500.

The current PEG works out to 2.0X, again above the 1.5X five-year median. The stock sports a Style Score of ‘D’ for Value.

Putting Everything Together

All in all, Netflix NFLX is heading into its next quarterly release on a positive trajectory, with EPS and sales revisions not only moving higher but remaining stable over recent weeks. Big growth is expected, with the reaffirmation of its FY25 guidance in its latest release also reflecting positivity concerning a slightly longer-term standpoint.

Shares are undoubtedly expensive, with investors having to fork up a premium given its high-growth nature. But the reality remains that the company has been enjoying significant momentum for some time now, with ad-supported tiers and a crackdown on password sharing likely to continue providing notable growth benefits for years to come.

Positive commentary surrounding its advertising efforts and other successful implementations will likely dictate the post-earnings move, but the real key for post-earnings positivity would be a guidance upgrade or more reaffirmation.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research