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Netflix (NFLX - Free Report) is set to release first-quarter 2021 results on Apr 19 after market close. Being the world's largest video streaming company, it is worth taking a look at its fundamentals ahead of the results.
The stock has underperformed the broad industry, having plunged 33.8% over the past three months compared to the industry’s average loss of 8.9%. The weak trend might reverse if Netflix comes up with an earnings beat. As a result, ETFs with the largest allocation to this streaming giant like MicroSectors FANG+ ETN (FNGS - Free Report) , Invesco Dynamic Media ETF , Vanguard Communication Services ETF (VOX - Free Report) , Simplify Volt Pop Culture Disruption ETF and Communication Services Select Sector SPDR Fund (XLC - Free Report) are in focus.
Earnings Whispers
Netflix has a Zacks Rank #3 (Hold) and an Earnings ESP of +0.91%. According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The online video streaming giant saw negative earnings estimate revision of a penny over the past 7 days for the to-be-reported quarter. Netflix is expected to post earnings decline of 22.1% and solid revenue growth of 10.8% for the to-be-reported quarter. The company’s earnings surprise history is impressive as it delivered an earnings surprise of 26.66%, on average, over the past four quarters. Netflix belongs to a top-ranked Zacks industry (placed at the top 41% of 250+ industries) A (see: all the Technology ETFs here).
The Zacks Consensus Estimate for the average target price is $556.77, with nearly 55% of the analysts giving a Strong Buy or a Buy rating ahead of the company’s earnings.
What’s Hot?
Wall Street analysts have turned pessimistic about Netflix ahead of its earnings as they are bracing for possibly the slowest growth in 10 years. Most analysts like BMO Capital Markets, Cowen and Truist Securities, lowered their target price on the stock. The streaming giant, which suspended its operations in Russia on Mar 6, is expected to take a hit amid the ongoing geopolitical crisis.
For Q1, Netflix expects to add 2.5 million new streaming subscribers, far below 3.98 million additions in the year-ago quarter. Subscriber growth has already been under pressure from the ongoing COVID-19 pandemic and economic hardship in parts of the world such as Latin America. This suggests that the streaming giant might be entering a new phase of slower growth.
MicroSectors FANG+ ETN is linked to the performance of the NYSE FANG+ Index, which is an equal-dollar-weighted index, designed to provide exposure to a group of highly traded growth stocks of next-generation technology and tech-enabled companies. It holds 10 stocks in its basket in equal proportion, with Netflix share coming in at 10%.
MicroSectors FANG+ ETN has accumulated $64.8 million in its asset base and charges 58 bps in annual fees. It trades in a paltry volume of 27,000 shares a day on average and has a Zacks ETF Rank #3 (Hold) (read: 5 ETFs to Ride on Tesla's Record Q1 Deliveries).
Invesco Dynamic Media ETF
Invesco Dynamic Media ETF provides exposure to companies engaged in the development, production, sale and distribution of goods or services used in the media industry by tracking the Dynamic Media Intellidex Index. It holds 31 stocks in the basket, with Netflix taking the fifth position holding 4.7% allocation.
Invesco Dynamic Media ETF has been able to manage $44 million in its asset base while sees a lower volume of about 6,000 shares a day. It has 0.63% in expense ratio and a Zacks ETF Rank #3 with a Medium risk outlook.
Vanguard Communication Services ETF also targets the telecommunication services stocks by tracking the MSCI US Investable Market Communication Services 25/50 Index. Holding 108 stocks in its basket, Netflix takes the eighth spot with a 4.2% share. Interactive media & services is the top sector, accounting for 43.9% of the portfolio, while movies & entertainment, cable & satellite, and integrated telecommunication services round off the next three.
Vanguard Communication Services ETF has AUM of $3.7 billion and trades in a good volume of 262,000 shares a day, on average. It charges 10 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook.
Simplify Volt Pop Culture Disruption ETF
Simplify Volt Pop Culture Disruption ETF is an actively managed fund, providing investors concentrated exposure to media platform leaders across streaming, social and Internet of Things. Netflix takes the eighth spot at a 4.3% allocation.
Simplify Volt Pop Culture Disruption ETF has amassed $1 million in its asset base and trades in volume of 1000 shares per day on average. The product has an expense ratio of 0.95%.
Communication Services Select Sector SPDR Fund (XLC - Free Report)
Communication Services Select Sector SPDR Fund offers exposure to companies from telecommunication services, media, entertainment and interactive media & services, and has accumulated $11.3 billion in its asset base. It follows the Communication Services Select Sector Index and holds 26 stocks in its basket, with Netflix occupying the eighth position at 4.2%. About half of the portfolio is allocated to interactive media & services, while entertainment and media round off the next two (read: Top and Flop ETFs of Q1).
Communication Services Select Sector SPDR Fund charges 10 bps in annual fees and trades in an average daily volume of 6 million shares. It has a Zacks ETF Rank #3.
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Netflix ETFs in Focus Ahead of Q1 Earnings
Netflix (NFLX - Free Report) is set to release first-quarter 2021 results on Apr 19 after market close. Being the world's largest video streaming company, it is worth taking a look at its fundamentals ahead of the results.
The stock has underperformed the broad industry, having plunged 33.8% over the past three months compared to the industry’s average loss of 8.9%. The weak trend might reverse if Netflix comes up with an earnings beat. As a result, ETFs with the largest allocation to this streaming giant like MicroSectors FANG+ ETN (FNGS - Free Report) , Invesco Dynamic Media ETF , Vanguard Communication Services ETF (VOX - Free Report) , Simplify Volt Pop Culture Disruption ETF and Communication Services Select Sector SPDR Fund (XLC - Free Report) are in focus.
Earnings Whispers
Netflix has a Zacks Rank #3 (Hold) and an Earnings ESP of +0.91%. According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The online video streaming giant saw negative earnings estimate revision of a penny over the past 7 days for the to-be-reported quarter. Netflix is expected to post earnings decline of 22.1% and solid revenue growth of 10.8% for the to-be-reported quarter. The company’s earnings surprise history is impressive as it delivered an earnings surprise of 26.66%, on average, over the past four quarters. Netflix belongs to a top-ranked Zacks industry (placed at the top 41% of 250+ industries) A (see: all the Technology ETFs here).
The Zacks Consensus Estimate for the average target price is $556.77, with nearly 55% of the analysts giving a Strong Buy or a Buy rating ahead of the company’s earnings.
What’s Hot?
Wall Street analysts have turned pessimistic about Netflix ahead of its earnings as they are bracing for possibly the slowest growth in 10 years. Most analysts like BMO Capital Markets, Cowen and Truist Securities, lowered their target price on the stock. The streaming giant, which suspended its operations in Russia on Mar 6, is expected to take a hit amid the ongoing geopolitical crisis.
For Q1, Netflix expects to add 2.5 million new streaming subscribers, far below 3.98 million additions in the year-ago quarter. Subscriber growth has already been under pressure from the ongoing COVID-19 pandemic and economic hardship in parts of the world such as Latin America. This suggests that the streaming giant might be entering a new phase of slower growth.
ETFs in Focus
MicroSectors FANG+ ETN (FNGS - Free Report)
MicroSectors FANG+ ETN is linked to the performance of the NYSE FANG+ Index, which is an equal-dollar-weighted index, designed to provide exposure to a group of highly traded growth stocks of next-generation technology and tech-enabled companies. It holds 10 stocks in its basket in equal proportion, with Netflix share coming in at 10%.
MicroSectors FANG+ ETN has accumulated $64.8 million in its asset base and charges 58 bps in annual fees. It trades in a paltry volume of 27,000 shares a day on average and has a Zacks ETF Rank #3 (Hold) (read: 5 ETFs to Ride on Tesla's Record Q1 Deliveries).
Invesco Dynamic Media ETF
Invesco Dynamic Media ETF provides exposure to companies engaged in the development, production, sale and distribution of goods or services used in the media industry by tracking the Dynamic Media Intellidex Index. It holds 31 stocks in the basket, with Netflix taking the fifth position holding 4.7% allocation.
Invesco Dynamic Media ETF has been able to manage $44 million in its asset base while sees a lower volume of about 6,000 shares a day. It has 0.63% in expense ratio and a Zacks ETF Rank #3 with a Medium risk outlook.
Vanguard Communication Services ETF (VOX - Free Report)
Vanguard Communication Services ETF also targets the telecommunication services stocks by tracking the MSCI US Investable Market Communication Services 25/50 Index. Holding 108 stocks in its basket, Netflix takes the eighth spot with a 4.2% share. Interactive media & services is the top sector, accounting for 43.9% of the portfolio, while movies & entertainment, cable & satellite, and integrated telecommunication services round off the next three.
Vanguard Communication Services ETF has AUM of $3.7 billion and trades in a good volume of 262,000 shares a day, on average. It charges 10 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook.
Simplify Volt Pop Culture Disruption ETF
Simplify Volt Pop Culture Disruption ETF is an actively managed fund, providing investors concentrated exposure to media platform leaders across streaming, social and Internet of Things. Netflix takes the eighth spot at a 4.3% allocation.
Simplify Volt Pop Culture Disruption ETF has amassed $1 million in its asset base and trades in volume of 1000 shares per day on average. The product has an expense ratio of 0.95%.
Communication Services Select Sector SPDR Fund (XLC - Free Report)
Communication Services Select Sector SPDR Fund offers exposure to companies from telecommunication services, media, entertainment and interactive media & services, and has accumulated $11.3 billion in its asset base. It follows the Communication Services Select Sector Index and holds 26 stocks in its basket, with Netflix occupying the eighth position at 4.2%. About half of the portfolio is allocated to interactive media & services, while entertainment and media round off the next two (read: Top and Flop ETFs of Q1).
Communication Services Select Sector SPDR Fund charges 10 bps in annual fees and trades in an average daily volume of 6 million shares. It has a Zacks ETF Rank #3.