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ETFs to Buy as Squid Game Boosts Netflix Q3 Earnings

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After a disappointing first half of the year, Netflix (NFLX - Free Report) reported solid third-quarter 2021 results after the closing bell on Tuesday. The world's largest video streaming company beat on earnings and showed a pick-up in subscriber growth. Revenues were in line with the estimates.

Netflix Q3 Earnings in Detail

The company reported earnings per share of $3.19, missing the Zacks Consensus Estimate of $2.56 but increasing from $1.74 reported in the year-ago quarter. Revenues rose 16.3% year over year to $7.48 billion, on par with the Zacks Consensus Estimate.

Netflix added 4.4 million new subscribers globally in the third quarter, well above the company’s guidance of 3.5 million additions and up from the 2.2 million additions seen in the year-ago quarter. The release of Netflix's hit Korean television show Squid Game on Sep 17, led to strong subscriber addition. The nine-episode thriller has become Netflix’s biggest-ever TV show with “mind-boggling" 142 million households around the world, having already watched Squid Game, surpassing the 82 million households that watched Bridgerton in its first four weeks.

Additionally, new seasons of original Netflix series “Money Heist” and “Sex Education” were the biggest returning shows, viewed by 69 million and 55 million households respectively, according to the Silicon Valley powerhouse (see: all the Technology ETFs here).

For the current quarter, Netflix expects to add 8.5 million new streaming subscribers as new seasons of some of its most popular shows are set to release. It includes new seasons of English language series like The Witcher, You, Tiger King and Cobra Kai, and non-English series like Sintonia and La Casa de Papel. Netflix is also expected to debut exciting new movies such as Red Notice, Don’t Look Up, The Harder They Fall, Army of Thieves and The Unforgivable. The latest films from acclaimed directors Jane Campion (The Power Of The Dog) and Paolo Sorrentino (The Hand of God) are also coming to Netflix in the fourth quarter.

The company has ramped up production, rebounding from pandemic-induced delays in the first half of the year. Beyond movies and TV shows, the streaming video pioneer is making a deeper dive into video games. It unveiled plans to enter the video game market, starting with mobile games based on its original TV shows and films, as well as to introduce completely new games and license some titles. Netflix is in the early stages of expanding its video game offerings, which would be available to subscribers at no extra charge (read: Gaming ETFs to Keep Shining Bright Amid Surging Sales).

Netflix expects revenues and earnings per share of $7.71 billion and 80 cents, respectively, for the ongoing quarter. The Zacks Consensus Estimate is pegged at $7.70 billion for revenues and $1.07 for earnings per share.

In the wake of strong subscriber growth, Netflix shares gained 1.5% in after-market trading hours. The stock currently has a Zacks Rank #3 (Hold) and belongs to a top-ranked Zacks industry (placed at the top 25% of 250+ industries).

ETFs in Focus

Investors seeking to capitalize on this Internet television network leader’s subscriber growth and the expected surge in its share price should bet on ETFs with a higher allocation to it. Below we have highlighted some that are in focus post NFLX results:

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 $77 million in its asset base and charges 58 bps in annual fees. It trades in a paltry volume of 32,000 shares a day on average and has a Zacks ETF Rank #3 (Hold) (read: ETFs to Buy on Tesla Record Q3 Delivery Numbers).

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 55 stocks in its basket with NFLX taking the third spot at 5.6% share. JHCS has managed assets worth $20.2 million and charges 40 bps in annual fees. It trades in an average daily volume of under 1,000 shares.

Roundhill Streaming Services & Technology ETF

This ETF debuted in February and has amassed $24.4 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 14,000 shares (read: Should You Buy the Dip With These Top-Ranked Tech ETFs?).

Pacer BioThreat Strategy ETF (VIRS - Free Report)

This fund seeks exposure to U.S. companies that provide their goods and services to the market by accomplishing one or more of the seven index themes. It tracks the LifeSci BioThreat Strategy Index, holding 51 stocks in its basket. Netflix occupies the top position with 5.9% of assets. The ETF accumulated $4.9 million in its asset base and charges 70 bps in annual fees. It trades in a paltry average daily volume of 500 shares.

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 second position holding 5.5% allocation. The product has been able to manage $115.6 million in its asset base while sees a lower volume of about 14,000 shares a day. It has 0.63% in expense ratio and a Zacks ETF Rank #3 with a Medium risk outlook.