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5 ETFs to Ride on the Strength in Netflix Q2 Earnings
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Netflix (NFLX - Free Report) spread optimism after reporting solid second-quarter 2022 results after the closing bell on Tuesday. The world's largest video streaming company lost fewer-than-expected subscribers and guided for a subscriber gain for the current quarter.
As such, shares of Netflix climbed as much as 12% in after-hour trading. Investors could easily tap the strength through ETFs with the largest allocation to this streaming giant. These funds — MicroSectors FANG+ ETN (FNGS - Free Report) , Invesco Dynamic Media ETF , Communication Services Select Sector SPDR Fund (XLC - Free Report) , ProShares On-Demand ETF (OND - Free Report) , and Invesco S&P 500 Equal Weight Communication Services ETF — seem compelling choices to play Q2 strength.
Q2 Earnings in Detail
The company reported earnings per share of $3.20, outpacing the Zacks Consensus Estimate of $2.90 and increasing from $2.97 in the year-ago quarter. Revenues rose 8.6% year over year to $7.97 billion and edged past the Zacks Consensus Estimate of $8.1 billion.
Netflix lost 970,000 subscribers globally in its second quarter, fewer than the company’s forecast to lose 2 million subscribers. This is especially thanks to the new season of “Stranger Things,” the company’s most popular English-language series ever and the second most popular overall. “Stranger Things” 4 has become the second show ever to surpass a billion hours viewed, attracting total viewership of more than 1.15 billion hours in its first 28 days of release. Squid Game remains Netflix’s most popular TV title ever, with 1.65 billion hours viewed in its first 28 days of release (read: ETFs to Gain From Stranger Things on Netflix).
Netflix also delivered a wide variety of other English language series hits in Q2, including season three of “The Umbrella Academy” (284 million view hours) and season one of “The Lincoln Lawyer,” a legal drama, which generated 277 million hours viewed.
The streaming giant has about 220.67 million subscribers worldwide at the end of June. Netflix sees a return to modest subscriber growth in the third quarter, and continues to make progress on plans to introduce a cheaper ad-supported subscription plan in partnership with Microsoft (MSFT - Free Report) in early 2023. Netflix expects to add 1 million new streaming subscribers in the third quarter.
Netflix is betting on a more robust slate of content, including the new season of “The Crown” and the action movie “The Gray Man” to accelerate growth. It also revealed a new Squid Game reality game show that will feature the biggest cash prize and largest cast in reality TV history. The streaming giant currently has more than 22 games available and plans to have 50 titles by the end of 2022, including the ones tied to Netflix’s popular TV shows The Queen’s Gambit, Shadow and Bone and Too Hot to Handle (see: all the Technology ETFs here).
Netflix expects revenues and earnings per share of $7.84 billion and $2.14, respectively, for the ongoing quarter. The Zacks Consensus Estimate is pegged at $8.08 billion for revenues and $2.71 for earnings per share.
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 the Netflix share coming in at 10%.
MicroSectors FANG+ ETN has accumulated $52.8 million in its asset base and charges 58 bps in annual fees. It trades in a paltry volume of 38,000 shares a day on average and has a Zacks ETF Rank #3 (Hold) (read: Will Tesla Q2 Weak Deliveries Create Pain for ETFs?).
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 32 stocks in the basket, with Netflix taking the second position, holding a 5.5% allocation.
Invesco Dynamic Media ETF has been able to manage $34.6 million in its asset base while seeing a lower volume of about 7,000 shares a day. It has 0.63% in expense ratio and a Zacks ETF Rank #3 with a Medium risk outlook.
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 $9.6 billion in its asset base. It follows the Communication Services Select Sector Index and holds 26 stocks in its basket, with Netflix occupying the fourth position at 4.8%. About half of the portfolio is allocated to interactive media & services, while entertainment and media round off the next two.
Communication Services Select Sector SPDR Fund charges 10 bps in annual fees and trades in an average daily volume of 7.2 million shares. It has a Zacks ETF Rank #2.
ProShares On-Demand ETF is the first ETF focused on investing in companies delivering seamless and convenient services at the touch of a button. It tracks the performance of the FactSet On-Demand Index and holds 29 stocks in its basket. Netflix occupies the fourth position in the basket and accounts for a 4.8% share.
ProShares On-Demand ETF has AUM of just $1 million and trades in a meager volume of under 1,000 shares a day, on average. It charges 58 bps in annual fees.
Invesco S&P 500 Equal Weight Communication Services ETF
Invesco S&P 500 Equal Weight Communication Services ETF follows the S&P 500 Equal Weight Communication Services Plus Index. It holds 27 stocks in its basket, with Netflix occupying the top position at 4.7% (read: Equal-Weight ETFs Beating Market-Cap Peers This Year).
Invesco S&P 500 Equal Weight Communication Services ETF has amassed $31.6 million in its asset base and trades in an average daily volume of 9,000 shares. It charges 40 bps in annual fees and has a Zacks ETF Rank #3.
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5 ETFs to Ride on the Strength in Netflix Q2 Earnings
Netflix (NFLX - Free Report) spread optimism after reporting solid second-quarter 2022 results after the closing bell on Tuesday. The world's largest video streaming company lost fewer-than-expected subscribers and guided for a subscriber gain for the current quarter.
As such, shares of Netflix climbed as much as 12% in after-hour trading. Investors could easily tap the strength through ETFs with the largest allocation to this streaming giant. These funds — MicroSectors FANG+ ETN (FNGS - Free Report) , Invesco Dynamic Media ETF , Communication Services Select Sector SPDR Fund (XLC - Free Report) , ProShares On-Demand ETF (OND - Free Report) , and Invesco S&P 500 Equal Weight Communication Services ETF — seem compelling choices to play Q2 strength.
Q2 Earnings in Detail
The company reported earnings per share of $3.20, outpacing the Zacks Consensus Estimate of $2.90 and increasing from $2.97 in the year-ago quarter. Revenues rose 8.6% year over year to $7.97 billion and edged past the Zacks Consensus Estimate of $8.1 billion.
Netflix lost 970,000 subscribers globally in its second quarter, fewer than the company’s forecast to lose 2 million subscribers. This is especially thanks to the new season of “Stranger Things,” the company’s most popular English-language series ever and the second most popular overall. “Stranger Things” 4 has become the second show ever to surpass a billion hours viewed, attracting total viewership of more than 1.15 billion hours in its first 28 days of release. Squid Game remains Netflix’s most popular TV title ever, with 1.65 billion hours viewed in its first 28 days of release (read: ETFs to Gain From Stranger Things on Netflix).
Netflix also delivered a wide variety of other English language series hits in Q2, including season three of “The Umbrella Academy” (284 million view hours) and season one of “The Lincoln Lawyer,” a legal drama, which generated 277 million hours viewed.
The streaming giant has about 220.67 million subscribers worldwide at the end of June. Netflix sees a return to modest subscriber growth in the third quarter, and continues to make progress on plans to introduce a cheaper ad-supported subscription plan in partnership with Microsoft (MSFT - Free Report) in early 2023. Netflix expects to add 1 million new streaming subscribers in the third quarter.
Netflix is betting on a more robust slate of content, including the new season of “The Crown” and the action movie “The Gray Man” to accelerate growth. It also revealed a new Squid Game reality game show that will feature the biggest cash prize and largest cast in reality TV history. The streaming giant currently has more than 22 games available and plans to have 50 titles by the end of 2022, including the ones tied to Netflix’s popular TV shows The Queen’s Gambit, Shadow and Bone and Too Hot to Handle (see: all the Technology ETFs here).
Netflix expects revenues and earnings per share of $7.84 billion and $2.14, respectively, for the ongoing quarter. The Zacks Consensus Estimate is pegged at $8.08 billion for revenues and $2.71 for earnings per share.
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 the Netflix share coming in at 10%.
MicroSectors FANG+ ETN has accumulated $52.8 million in its asset base and charges 58 bps in annual fees. It trades in a paltry volume of 38,000 shares a day on average and has a Zacks ETF Rank #3 (Hold) (read: Will Tesla Q2 Weak Deliveries Create Pain for ETFs?).
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 32 stocks in the basket, with Netflix taking the second position, holding a 5.5% allocation.
Invesco Dynamic Media ETF has been able to manage $34.6 million in its asset base while seeing a lower volume of about 7,000 shares a day. It has 0.63% in expense ratio and a Zacks ETF Rank #3 with a Medium risk outlook.
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 $9.6 billion in its asset base. It follows the Communication Services Select Sector Index and holds 26 stocks in its basket, with Netflix occupying the fourth position at 4.8%. About half of the portfolio is allocated to interactive media & services, while entertainment and media round off the next two.
Communication Services Select Sector SPDR Fund charges 10 bps in annual fees and trades in an average daily volume of 7.2 million shares. It has a Zacks ETF Rank #2.
ProShares On-Demand ETF (OND - Free Report)
ProShares On-Demand ETF is the first ETF focused on investing in companies delivering seamless and convenient services at the touch of a button. It tracks the performance of the FactSet On-Demand Index and holds 29 stocks in its basket. Netflix occupies the fourth position in the basket and accounts for a 4.8% share.
ProShares On-Demand ETF has AUM of just $1 million and trades in a meager volume of under 1,000 shares a day, on average. It charges 58 bps in annual fees.
Invesco S&P 500 Equal Weight Communication Services ETF
Invesco S&P 500 Equal Weight Communication Services ETF follows the S&P 500 Equal Weight Communication Services Plus Index. It holds 27 stocks in its basket, with Netflix occupying the top position at 4.7% (read: Equal-Weight ETFs Beating Market-Cap Peers This Year).
Invesco S&P 500 Equal Weight Communication Services ETF has amassed $31.6 million in its asset base and trades in an average daily volume of 9,000 shares. It charges 40 bps in annual fees and has a Zacks ETF Rank #3.