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What's in Store for Netflix ETFs in Q1 Earnings?

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Netflix (NFLX - Free Report) is set to release first-quarter 2021 results on Apr 20 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 lost 6.8% over the past three months compared to the industry’s average growth of 2.8%. The underperformance might reverse if Netflix comes up with an earnings beat.

Earnings Whispers

Netflix has a Zacks Rank #3 (Hold) and an Earnings ESP of -0.45%. According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 increases 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 positive earnings estimate revision of 7 cents over the past 30 days for the first quarter. Analysts raising estimates right before earnings — with the most up-to-date information possible — is a good indicator for the stock. Additionally, Netflix is expected to post robust earnings growth of 89.8% and solid revenue growth of 23.7% in the to-be-reported quarter. However, the company’s earnings surprise history is weak as it delivered a negative earnings surprise of 12.04%, on average, over the past four quarters.

The stock belongs to a top-ranked Zacks industry (placed at the bottom 41% of 250+ industries), suggesting solid growth in the months ahead (see: all the Technology ETFs here).

The Zacks Consensus Estimate for the average target price is $615.59, with more than 77% of the analysts giving a Strong Buy or a Buy rating ahead of the company’s earnings.

Netflix, Inc. Price, Consensus and EPS Surprise Netflix, Inc. Price, Consensus and EPS Surprise

Netflix, Inc. price-consensus-eps-surprise-chart | Netflix, Inc. Quote

What to Watch Out for?

After a surge in sign-ups in 2020, investors will closely monitor whether the streaming video giant can maintain its subscriber growth amid growing competition from new streaming services and from other forms of entertainment as the economy begins to emerge from the COVID-19 shutdown.

Investors have largely been betting on the companies poised to benefit from the reopening economy rather than the companies, which have surged during the pandemic (read: 10 Sector ETFs Flying Higher on a Recovering Economy).

For the fourth quarter, Netflix expects to add 6 million new subscribers worldwide, down from the record 15.8 million raked up in the year-ago quarter.

ETFs in Focus

Ahead of its earnings report, investors could focus on ETFs having the largest allocation to this streaming giant. Below are five ETFs with the highest allocation to NFLX that could make compelling plays:

MicroSectors FANG+ ETN (FNGS - Free Report)

This 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 the Netflix share coming in at 10%. The product has accumulated $72.9 million in its asset base and charges 58 bps in annual fees. It trades in a paltry volume of 64,000 shares a day on average and has a Zacks ETF Rank #3 (Hold) (read: ETFs to Buy on Nvidia's Growth Story).

Multifactor Media and Communications ETF (JHCS - Free Report)

This ETF targets a wide range of U.S. media and communication stocks to exploit the sector's opportunities by tracking the John Hancock Dimensional Media and Communications Index. It holds 53 stocks in its basket with NFLX taking the third spot at 5.9% share. JHCS has managed assets worth $30.8 million and charges 40 bps in annual fees. It trades in an average daily volume of about 2,000 shares.

Roundhill Streaming Services & Technology ETF (SUBZ - Free Report)

This ETF has debuted in the space two months back and has amassed $41 million in its asset base. It is actively managed and offers exposure to the streaming industry. The fund consists of companies from across the globe that are actively involved in the business of streaming. It holds 38 stocks in its basket with Netflix occupying the top spot at 5.9% share. SUBZ charges 75 bps in annual fees and trades in an average daily volume of 175,000 shares (read: 6 Successful New ETFs of First-Quarter 2021).

Invesco S&P 500 Equal Weight Communication Services ETF (EWCO - Free Report)

This fund follows the S&P 500 Equal Weight Communication Services Plus Index. It holds 27 stocks in its basket with Netflix occupying the third position at 4.9%. The product has amassed $42 million in its asset base and trades in an average daily volume of 13,000 shares. It charges 40 bps in annual fees and has a Zacks ETF Rank #3.

Invesco Dynamic Media ETF (PBS - Free Report)

This fund 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 32 stocks in the basket with Netflix taking the third position with 4.9% allocation. The product has been able to manage $84.7 million in its asset base while sees a lower volume of about 32,000 shares a day. It has 0.63% in expense ratio and a Zacks ETF Rank #4 (Sell) with a Medium risk outlook.

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