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Netflix Logs Best Week Since 2022: ETFs to Buy on High Momentum?
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Streaming giant Netflix (NFLX - Free Report) , Inc. has just logged its best weekly performance in over a year, thanks to a better-than-expected earnings report, per Bloomberg, as quoted on Yahoo Finance. Netflix shares recorded an 18% gain for the week. This is the highest the stock has traded in over two years, showing a significant rebound from a volatile 2023 impacted by Hollywood strikes.
Back-to-back solid earnings following the Hollywood strikes have contributed to this optimism. The company provided upbeat guidance. Zacks Rank #1 (Strong Buy) Netflix has an upbeat Momentum score of A.
All these upbeat factors put Netflix-heavy ETFs like MicroSectors FANG+ ETN (FNGS - Free Report) , Invesco Next Gen Media and Gaming ETF (GGME - Free Report) , REX FANG & Innovation Equity Premium Income ETF (FEPI - Free Report) and First Trust S-Network Streaming and Gaming ETF (BNGE - Free Report) .
Inside latest Earnings Results
Although the streaming giant reported fourth-quarter 2023 earnings of $2.11 per share, which missed the Zacks Consensus Estimate by 4.09%, its revenues of $8.83 billion increased 3.4% year over year and beat the consensus mark by 1.33%. Shares jumped as Netflix reported strong subscriber additions which topped 13 million. There was a rise of 1% in average revenue per subscription. Notably, Netflix gained 7.66 million paid subscribers in the year-ago quarter.
This validated the company’s its recent strategic decisions. These include price hikes, a crackdown on password sharing, and the introduction of an advertising-subsidized tier. Additionally, Netflix's venture into live events through acquiring exclusive rights to WWE programming like Raw has been a significant move (read: Netflix Shares Surge Post Earnings: ETFs in Focus).
Guidance
For 2024, the company expects healthy double digit revenue growth on a F/X neutral basis, driven by a rise in membership as well as improvement in F/X neutral ARM. Netflix raised full-year 2024 operating margin forecast from 22%-23% to 24% (based on F/X rates as of Jan 1, 2024). This reflects the weakening of the U.S. dollar compared with other currencies since October as well as stronger-than-forecasted fourth-quarter 2023 performance.
Industry Comparison and Analyst Perspectives
While Netflix thrives, its competitors like Warner Bros. Discovery, Inc., Paramount Global, and Walt Disney Co. have not seen similar success this year. Analysts from Argus Research Co., Citigroup Global Markets Inc., Macquarie Group Ltd., and DZ Bank AG have revised their outlook on Netflix, with many upgrading it to buy-equivalent ratings, pr Bloomberg.
Wall Street's Cautious Optimism
Despite the bullish sentiment, analysts hold a cautious view on the stock's future price. Based on short-term price targets offered by 34 analysts, the average price target for Netflix comes to $532.18. The forecasts range from a low of $333.00 to a high of $700.00. The average price target represents a decline of 5.31% from the last closing price of $562.00.
Netflix currently has an average brokerage recommendation (ABR) of 1.96 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell etc.) made by 38 brokerage firms. The current ABR compares to an ABR of 1.90 a month ago based on 36 recommendations.
Of the 38 recommendations deriving the current ABR, 21 are Strong Buy and one is Buy. Strong Buy and Buy respectively account for 55.26% and 2.63% of all recommendations. A month ago, Strong Buy made up 58.33%, while Buy represented 2.78%.
Should You Tap Netflix-Heavy ETFs?
Concerns arise as Netflix trades at a premium compared to its peers and the broader market. However, investors seem willing to pay this premium for growth-oriented companies, as observed last year with the Magnificent Seven technology stocks, per Bloomberg. Hence, investors who do not have a strong stomach for risks may play Netflix-heavy ETFs instead of the stock itself as the basket approach minimizes the company-specific risks.
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Netflix Logs Best Week Since 2022: ETFs to Buy on High Momentum?
Streaming giant Netflix (NFLX - Free Report) , Inc. has just logged its best weekly performance in over a year, thanks to a better-than-expected earnings report, per Bloomberg, as quoted on Yahoo Finance. Netflix shares recorded an 18% gain for the week. This is the highest the stock has traded in over two years, showing a significant rebound from a volatile 2023 impacted by Hollywood strikes.
Back-to-back solid earnings following the Hollywood strikes have contributed to this optimism. The company provided upbeat guidance. Zacks Rank #1 (Strong Buy) Netflix has an upbeat Momentum score of A.
All these upbeat factors put Netflix-heavy ETFs like MicroSectors FANG+ ETN (FNGS - Free Report) , Invesco Next Gen Media and Gaming ETF (GGME - Free Report) , REX FANG & Innovation Equity Premium Income ETF (FEPI - Free Report) and First Trust S-Network Streaming and Gaming ETF (BNGE - Free Report) .
Inside latest Earnings Results
Although the streaming giant reported fourth-quarter 2023 earnings of $2.11 per share, which missed the Zacks Consensus Estimate by 4.09%, its revenues of $8.83 billion increased 3.4% year over year and beat the consensus mark by 1.33%. Shares jumped as Netflix reported strong subscriber additions which topped 13 million. There was a rise of 1% in average revenue per subscription. Notably, Netflix gained 7.66 million paid subscribers in the year-ago quarter.
This validated the company’s its recent strategic decisions. These include price hikes, a crackdown on password sharing, and the introduction of an advertising-subsidized tier. Additionally, Netflix's venture into live events through acquiring exclusive rights to WWE programming like Raw has been a significant move (read: Netflix Shares Surge Post Earnings: ETFs in Focus).
Guidance
For 2024, the company expects healthy double digit revenue growth on a F/X neutral basis, driven by a rise in membership as well as improvement in F/X neutral ARM. Netflix raised full-year 2024 operating margin forecast from 22%-23% to 24% (based on F/X rates as of Jan 1, 2024). This reflects the weakening of the U.S. dollar compared with other currencies since October as well as stronger-than-forecasted fourth-quarter 2023 performance.
Industry Comparison and Analyst Perspectives
While Netflix thrives, its competitors like Warner Bros. Discovery, Inc., Paramount Global, and Walt Disney Co. have not seen similar success this year. Analysts from Argus Research Co., Citigroup Global Markets Inc., Macquarie Group Ltd., and DZ Bank AG have revised their outlook on Netflix, with many upgrading it to buy-equivalent ratings, pr Bloomberg.
Wall Street's Cautious Optimism
Despite the bullish sentiment, analysts hold a cautious view on the stock's future price. Based on short-term price targets offered by 34 analysts, the average price target for Netflix comes to $532.18. The forecasts range from a low of $333.00 to a high of $700.00. The average price target represents a decline of 5.31% from the last closing price of $562.00.
Netflix currently has an average brokerage recommendation (ABR) of 1.96 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell etc.) made by 38 brokerage firms. The current ABR compares to an ABR of 1.90 a month ago based on 36 recommendations.
Of the 38 recommendations deriving the current ABR, 21 are Strong Buy and one is Buy. Strong Buy and Buy respectively account for 55.26% and 2.63% of all recommendations. A month ago, Strong Buy made up 58.33%, while Buy represented 2.78%.
Should You Tap Netflix-Heavy ETFs?
Concerns arise as Netflix trades at a premium compared to its peers and the broader market. However, investors seem willing to pay this premium for growth-oriented companies, as observed last year with the Magnificent Seven technology stocks, per Bloomberg. Hence, investors who do not have a strong stomach for risks may play Netflix-heavy ETFs instead of the stock itself as the basket approach minimizes the company-specific risks.