Netflix (NFLX) Seeks to Beat Q1 2023 Earnings Expectations
Apr 17, 2023
Netflix (NFLX) announces their quarterly earnings on Tuesday, April 18th after the market closes. After three earnings per share (EPS) beats in a row, they reported a miss last quarter. Expectations are that the popular streaming company will report a $2.86 EPS on $8.18 billion in revenue. Netflix launched their ad-supported tier in November of 2022, so the markets will have more information and guidance on that release after the earnings report and conference call on Tuesday.
NFLX is up just over 10% on the year, which is outperforming NDX the NASDAQ 100. It has retreated from the highs realized in February, but the stock is up over 50% from June of 2022, so relative performance is still strong. NFLX is currently trading around $330 a share as of Monday, April 17th.
Looking at the implied volatility environment of the options market in NFLX, we can derive that the expected move for the rest of the week is at $28.55 as of Monday the 17th – this includes the earnings announcement of course, but there will still be some expected price movement after the fact. Regardless, this expected move for the week is just shy of 10% of the notional value of the stock price, which is high for an earnings announcement for any stock.
Looking at the expected move for this week relative to the next few months, we can see that the options market implies a huge chunk of the expected move for the next few months to be priced into this weekly cycle – this could mean fireworks for the stock price if the expected move is realized or exceeded on the earnings announcement.
Looking further at the options market, we can see that the market is pricing in the risk of a high-velocity move to the upside – this is known as call skew. The equidistant call and put from the stock price are trading for different values, and the call is trading for $4.95 which is significantly more than the 300-strike put which is trading for $3.70.
This does not mean that the stock price is going to go up, it just means that the market believes the risk of a high-velocity move this week is to the upside.
All eyes will be on NFLX earnings Wednesday, April 18th after the market closes – tune in to see if there are fireworks in the stock price!
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