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Netflix Sinks on Q1 Subscriber Miss: ETFs in Focus

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Netflix (NFLX - Free Report) , the world's largest video streaming company, disappointed investors with lesser subscriber growth when it reported first-quarter 2021 results after the closing bell on Tuesday.

This has pushed Netflix shares down by as much as 12% in after-market hours, wiping about $25 billion from the company's market capitalization. With this decline, the stock turned to negative from a year-to-date look. However, Netflix topped earnings and revenue estimates.

Netflix Q1 Earnings in Detail

The company reported earnings per share of $3.75, easily crushing the Zacks Consensus Estimate of $2.98 and more than doubling from the $1.57 reported in the year-ago quarter. Revenues climbed 24% year over year to $7.16 billion and came in above the Zacks Consensus Estimate of $7.14 billion.

Netflix added just 3.98 million new subscribers globally in the first quarter, well below the company’s guidance of 6 million additions and dramatically down from the 15.77 million additions seen in the year-ago quarter. The slower production of TV shows and movies caused by the pandemic hurt subscriber growth in the first quarter. At the end of Q1, Netflix has 207.64 million paid subscribers worldwide, up 13.6% year over year (read: PC Sales See Best Growth in 2 Decades: Tech ETFs to Buy).

The company warned that growth will remain muted even in the second quarter and is expected to reach a record low of 1 million subscribers worldwide, partly due to lack of content. In second-quarter last year, Netflix had added 10.09 million new subscribers. The new series including "Shadow and Bone," "Jupiter's Legacy" and new seasons of "Who Killed Sara?" and "Lucifer" is set to release in the second quarter.

Nevertheless, it projects membership growth to accelerate in the second half of the year with the return of new seasons of some of the biggest hits and an exciting film lineup. These include new seasons of "You," "Money Heist," “Sex Education,” and "The Witcher," action movie "Red Notice," “The Kissing Booth” and “Don’t Look Up” (see: all the Technology ETFs here).

Netflix plans to release 70 new movies this year and its content continues to amass awards, including 10 Golden Globe wins for its shows and movies, and 35 Oscar nominations.

Revenues and earnings per share are expected to be $7.30 billion and $3.16, respectively, for the ongoing quarter. The Zacks Consensus Estimate is pegged at $7.37 billion for revenues and $2.61 for earnings per share. The stock currently has a Zacks Rank #3 (Hold) and belongs to a top-ranked Zacks industry (placed at the top 31% of 250+ industries).

ETFs in Focus

The weak result has put the ETFs with a higher allocation to Netflix in focus. We have highlighted them below:

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 Netflix share coming in at 10%. The product has accumulated $73.8 million in its asset base and charges 58 bps in annual fees. It trades in a lower 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 fourth spot at 5.4% share. JHCS has managed assets worth $31.1 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 debuted in the space two months back and has amassed $40.8 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 6.1% share. SUBZ charges 75 bps in annual fees and trades in an average daily volume of 168,000 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 second position at 5%. The product has amassed $42.4 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 5% allocation. The product has been able to manage $85.2 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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