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Netflix share price: Q2 2021 earnings preview


MongiIG

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Netflix Q2 results are likely to see the weakest quarterly subscriber growth in at least five years.

NetflixSource: Bloomberg
 
 Shaun Murison | Senior Market Analyst, Johannesburg | Publication date: Thursday 15 July 2021 11:08. IG

When are the Netflix results?

Netflix, the world's leading streaming entertainment service, with 207.64 million paid memberships in over 190 countries, is scheduled to report quarter two (Q2) 2021 financial results on Tuesday 20 July at 1pm (Pacific time).

What to expect from Netflix Q2 2021 results?

Netflix results are expected to highlight a softer quarter for the group, when considering a high base of comparison in the previous year’s corresponding quarter. While 2020 saw a surge in appetite for on demand viewing, in lieu of Covid-19 and accompanying lockdown restrictions, the vaccine rollout in key markets has opened up activity options as society returns to some semblance of normality.

The group has guided the following in terms of the upcoming Q2 2021 results:

  • Revenue: $7.3 billion
  • Operating income: $1.865 billion
  • Operating margin: 25.5%
  • Global streaming paid memberships: 208.64 million
  • Global streaming paid net additions: 1 million

How to trade Netflix’s results

Netflix results always find an increased investor emphasis on the groups global streaming net additions figure. The group’s 1 million new (net) subscriber forecast is a conservative one relatively speaking. The lowest quarterly additions figure since 2016 was 2.2 million subscribers. Weaker subscriber growth does often follow a strong quarter. However, Q1 2021 was not a strong one and in fact it's the worst first quarter in at least five years.

In the last 21 quarters (dating back to Q1 2016), only seven of the net subscriber addition figures have fallen short of the group’s guidance, while 14 have exceeded guidance.

In times where realised subscriber numbers have fallen short of forecasts, traders have generally been rewarded for accumulating as weakness plays out. In times where actual subscriber numbers have exceeded forecasts, traders have been rewarded for buying into initial strength and locking in profits over the following few days.

In terms of an institutional view as of 14 July 2021, a Refinitiv poll of 45 analysts have an average rating of ‘buy’ for Netflix, with a long-term price target (mean) of $613.68.

Netflix_Broker_ratings-150721.pngSource: IG charts

 

Learn more on how to buy, sell and short Netflix shares

Netflix share price – technical view

The share price of Netflix remains in a broad trading range between levels $469.80 (support) and $563.00 (resistance). In the near term we have seen a ‘W’ shaped bullish price reversal near the aforementioned support area of this range. The move higher which has followed, has pushed the price of Netflix back into overbought territory.

Traders might prefer a pullback from overbought territory back towards the $510.00 level for long entry. The chart also highlights (blue circles) how oversold signals have been positive entry points into Netflix over the last 12 months or so.

Netflix chartSource: IG charts

Summary

  • Netflix is expected to see subscriber growth slow as lower pandemic restrictions ease viewing appetite
  • Net paid subscriber additions of 1 million are expected, the lowest quarterly growth figure in at least five years
  • Revenue is forecast at $7.3 billion for the quarter
  • Operating income is forecast at $1.865 billion for the quarter
  • The average broker rating for Netflix is ‘buy’
  • Technical traders might hope for a pullback from overbought territory to find long entry into the share

 

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