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It’s not earnings, but beat on subscriber growth that took Netflix (NFLX - Free Report) shares to an all-time high, in after-hours trading on Oct 16. Shares rose 1.2% after market close after the announcement that Netflix added more subscribers globally than expected in the third quarter. Not only this, the world's largest video streaming company’s guidance for subscriber growth was in line with Wall Street forecasts. The company otherwise missed earnings estimate but beat on the top line.
Netflix Q3 Earnings in Detail
The company reported earnings per share of 29 cents, below the Zacks Consensus Estimate of 32 cents and up from 12 cents in the year-ago quarter. Revenues climbed 30.3% year over year to $2.985 billion, and beat our estimate of $2.973 billion. Most of the strength came from global streaming revenues, which were up 33% year over year (see: all the Technology ETFs here).
Netflix added 5.3 million new subscribers globally (up 49% year over year) in the third quarter, easily crushing Wall Street's estimate of 4.5 million. Notably, the video streaming giant reached 109.25 million subscribers globally at the end of the third quarter with international subscribers (56.48 million) outpacing the United States (52.772 million). This indicates continued dominance in the global streaming media market.
Solid Outlook
In the ongoing fourth quarter, the company expects to add 6.3 million subscribers (higher than analysts' average estimate of 6.25 million), including 1.25 million in the United States and 5.05 million internationally. Revenues and earnings per share are expected to be $3.274 billion and 41 cents, respectively. Both numbers are well ahead of the current Zacks Consensus Estimate of $3.152 billion for revenues and 33 cents for earnings per share.
Though Netflix belongs to a miserable Zacks Industry Rank in the bottom 42%, and has a disappointing VGM Style Score of F along with an inflated P/E ratio of 163.38 compared with the industry average of 14.68, its Zacks Sector Rank is in the top 50%. The stock currently carries a Zacks Rank #2 (Buy), suggesting continued outperformance.
ETFs to Buy
Investors might want to capitalize on this Internet television network leader’s growth and the ongoing surge in its share price with lesser risk in the form of ETFs. For these investors, we have highlighted five ETFs with a higher allocation to Netflix and the potential to be big movers in the coming days.
This fund offers exposure to the largest and most-liquid companies that are engaged in Internet-related businesses by tracking the Nasdaq Internet Index. It holds about 85 stocks with Netflix taking the first spot in its basket with 8.72% allocation. Internet software & services dominates the portfolio with 54.7% share in the basket, closely followed by Internet & direct marketing at 38.8%. The product has AUM of $486 million and trades in a light volume of about 29,000 shares a day. It charges 60 bps in fees per year and has a Zacks ETF Rank of 1 or ‘Strong Buy rating with a High risk outlook (read: Invest in FANG Stocks With These ETFs).
First Trust Dow Jones Internet Index (FDN - Free Report)
This is one of the most popular and liquid ETFs in the broad tech space with AUM of $4.96 billion and average daily volume of around 341,000 shares. The fund tracks the Dow Jones Internet Composite Index and charges 54 bps in fees per year. Holding 42 stocks in its basket, Netflix occupies the third position at 5.63%. Information Technology accounts for half of the portfolio while Consumer Discretionary makes up for 20%. The product has a Zacks ETF Rank of 2 with a High risk outlook (read: 5 Winning ETF Strategies for Q4).
PowerShares Dynamic Media Portfolio
This fund seeks to offer capital appreciation by investing in companies that are selected on a variety of investment merit criteria, including price and earnings momentum, quality, management action, and value, as per the issuer. Holding about 29 stocks in the basket, Netflix takes the first spot at 5.98% of assets. Within the media sector, the product is well spread out across movies & entertainments, television & radio, publishing, cable & satellite and Internet & mobile applications that account for a double-digit exposure each. The product has been able to manage $73.7 million in its asset base while sees lower volume of about 54,000 shares a day. It has 0.63% in expense ratio and a Zacks ETF Rank of 3 or ‘Hold’ rating with a Medium risk outlook.
First Trust Nasdaq Retail ETF
The fund follows the Nasdaq US Smart Retail Index and holds 60 stocks in its basket. NFLX occupies the sixth position in the basket with 4.42% of assets. Broadline retailers make up for a bigger chunk at 26.03%. FTXD has accumulated $1.0 million since inception and trades in nearly 2,000 shares a day on average. Expense ratio comes in at 0.60%.
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Netflix at Record High: ETFs to Play
It’s not earnings, but beat on subscriber growth that took Netflix (NFLX - Free Report) shares to an all-time high, in after-hours trading on Oct 16. Shares rose 1.2% after market close after the announcement that Netflix added more subscribers globally than expected in the third quarter. Not only this, the world's largest video streaming company’s guidance for subscriber growth was in line with Wall Street forecasts. The company otherwise missed earnings estimate but beat on the top line.
Netflix Q3 Earnings in Detail
The company reported earnings per share of 29 cents, below the Zacks Consensus Estimate of 32 cents and up from 12 cents in the year-ago quarter. Revenues climbed 30.3% year over year to $2.985 billion, and beat our estimate of $2.973 billion. Most of the strength came from global streaming revenues, which were up 33% year over year (see: all the Technology ETFs here).
Netflix added 5.3 million new subscribers globally (up 49% year over year) in the third quarter, easily crushing Wall Street's estimate of 4.5 million. Notably, the video streaming giant reached 109.25 million subscribers globally at the end of the third quarter with international subscribers (56.48 million) outpacing the United States (52.772 million). This indicates continued dominance in the global streaming media market.
Solid Outlook
In the ongoing fourth quarter, the company expects to add 6.3 million subscribers (higher than analysts' average estimate of 6.25 million), including 1.25 million in the United States and 5.05 million internationally. Revenues and earnings per share are expected to be $3.274 billion and 41 cents, respectively. Both numbers are well ahead of the current Zacks Consensus Estimate of $3.152 billion for revenues and 33 cents for earnings per share.
Though Netflix belongs to a miserable Zacks Industry Rank in the bottom 42%, and has a disappointing VGM Style Score of F along with an inflated P/E ratio of 163.38 compared with the industry average of 14.68, its Zacks Sector Rank is in the top 50%. The stock currently carries a Zacks Rank #2 (Buy), suggesting continued outperformance.
ETFs to Buy
Investors might want to capitalize on this Internet television network leader’s growth and the ongoing surge in its share price with lesser risk in the form of ETFs. For these investors, we have highlighted five ETFs with a higher allocation to Netflix and the potential to be big movers in the coming days.
PowerShares Nasdaq Internet Portfolio (PNQI - Free Report)
This fund offers exposure to the largest and most-liquid companies that are engaged in Internet-related businesses by tracking the Nasdaq Internet Index. It holds about 85 stocks with Netflix taking the first spot in its basket with 8.72% allocation. Internet software & services dominates the portfolio with 54.7% share in the basket, closely followed by Internet & direct marketing at 38.8%. The product has AUM of $486 million and trades in a light volume of about 29,000 shares a day. It charges 60 bps in fees per year and has a Zacks ETF Rank of 1 or ‘Strong Buy rating with a High risk outlook (read: Invest in FANG Stocks With These ETFs).
First Trust Dow Jones Internet Index (FDN - Free Report)
This is one of the most popular and liquid ETFs in the broad tech space with AUM of $4.96 billion and average daily volume of around 341,000 shares. The fund tracks the Dow Jones Internet Composite Index and charges 54 bps in fees per year. Holding 42 stocks in its basket, Netflix occupies the third position at 5.63%. Information Technology accounts for half of the portfolio while Consumer Discretionary makes up for 20%. The product has a Zacks ETF Rank of 2 with a High risk outlook (read: 5 Winning ETF Strategies for Q4).
PowerShares Dynamic Media Portfolio
This fund seeks to offer capital appreciation by investing in companies that are selected on a variety of investment merit criteria, including price and earnings momentum, quality, management action, and value, as per the issuer. Holding about 29 stocks in the basket, Netflix takes the first spot at 5.98% of assets. Within the media sector, the product is well spread out across movies & entertainments, television & radio, publishing, cable & satellite and Internet & mobile applications that account for a double-digit exposure each. The product has been able to manage $73.7 million in its asset base while sees lower volume of about 54,000 shares a day. It has 0.63% in expense ratio and a Zacks ETF Rank of 3 or ‘Hold’ rating with a Medium risk outlook.
First Trust Nasdaq Retail ETF
The fund follows the Nasdaq US Smart Retail Index and holds 60 stocks in its basket. NFLX occupies the sixth position in the basket with 4.42% of assets. Broadline retailers make up for a bigger chunk at 26.03%. FTXD has accumulated $1.0 million since inception and trades in nearly 2,000 shares a day on average. Expense ratio comes in at 0.60%.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>