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Netflix Earnings Preview: Will the Password Crackdown and Hollywood Strikes Impact Numbers?

By:Thomas Westwater

NFLX is expected to post earnings of $3.49 per share, from $8.54 billion in revenue

  • Netflix to report Q3 earnings on Wednesday after the bell.
  • Subscriber growth amid password crack down is key.
  • Volatility in stock price offers premium for options strategies.

Netflix (NFLX) is set to report third-quarter fiscal results on Wednesday, October 18, after the close. The streaming titan is up 22% this year, but that pales in comparison to the Nasdaq-100 (/NQ) gain of nearly 40%, which leaves the stock in an underdog position going into the end of the year.

Netflix third-quarter earnings preview

Investors expect to see NFLX post earnings of $3.49 per share on a GAAP basis from $8.54 billion in revenue. That would represent year-over-year growth of 15% and 8%, respectively.

The focus is on subscriber numbers, with Netflix expecting to add six million streamers. The crackdown on password sharing may help to achieve that target, although higher interest rates and the restart of student loan payments may throttle that number as consumers cut discretionary spending.

However, Netflix continues to promote its ad-supported plans that offer lower prices at the cost of seeing ads and removing the ability to download videos. Those plans should expand to more markets in the coming quarters. The Hollywood strikes likely helped Netflix's bottom line and may have increased free cash flows, albeit as a temporary phenomenon.

Still, the company is struggling with how investors view the stock. The days of double-digit revenue growth may be over, and the lofty multiples applied to its price will likely diminish over the coming years, especially if higher interest rates persist. Investors on the call will want to hear more about future price hikes and the path to keeping user growth sustained.

Trading Netflix earnings

The Oct. 20 expiration that contains the Oct. 18 earnings is pricing a 27.28-point expected move. The current implied volatility rank (IVR) is at 46.6, leaving investors with plenty of premium selling opportunity for an earnings play.

Netflix technical outlook

Last week, Netflix slipped below its 200-day simple Moving Average for the first time this year, and since September, prices have traded below its 26-day Exponential Moving Average. Overall, bulls have some work to do to counter the bearish technical setup. Will earnings help to reestablish a. bullish footing?


Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater

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