Netflix, a global juggernaut in video streaming, is gearing up to unveil its Q3 2024 results post-market on Oct. 17. Assessing the bedrock factors of this entertainment titan pre-earnings can yield valuable insights.

Over the last three months, Netflix stocks catapulted by 8.6%, slightly outpacing the industry surge of 7% in the same period. The company’s uptrend is expected to persist, fueled by the anticipation of an earnings triumph.

Against this backdrop, Exchange Traded Funds (ETFs) heavily anchored in Netflix like MicroSectors FANG+ ETN, Invesco Next Gen Media and Gaming ETF, First Trust Dow Jones Internet Index Fund, Communication Services Select Sector SPDR Fund, and First Trust S-Network Streaming & Gaming ETF are in the investment crosshairs.

Peeking into Earnings Speculation

Netflix flaunts an Earnings ESP of +1.37% and a Zacks Rank #2 (Buy). Our model suggests that a positive Earnings ESP combined with a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) heightens the likelihood of an earnings outperformance. Dive deeper into stock opportunities before they are officially disclosed using our Earnings ESP Filter.

The luminary in online video streaming witnessed no earnings estimate tweaks in the past seven or 30 days for the imminent quarter. Projections project a robust 35.9% surge in earnings and a 14.3% boost in revenue. Netflix boasts an impressive track record of earnings beat, averaging 6.15% over the past four quarters. The company sits within the top quartile of Zacks industries (ranked at the top 41% of 250+ industries).

Locate the freshest EPS estimates and surprises on Zacks’ Earnings Calendar.

Netflix, Inc. Price, Consensus and EPS Surprise

Netflix sports an average brokerage recommendation (ABR) of 1.89 on a scale ranging from 1 to 5 (Strong Buy to Strong Sell), based on 40 brokerage endorsements. This rating contrasts with the 1.91 ABR from a month earlier out of 39 recommendations.

Within the 40 recommendations shaping the current ABR, 23 signal Strong Buy and two tout Buy. The combined representation of Strong Buy and Buy stands at 57.5% and 5%, respectively. A month back, Strong Buy encompassed 53.85%, while Buy enfolded 5.13%.

Derived from short-term price targets by 36 analysts, Netflix’s average price expectation is $715.75, with forecasts oscillating between $545.00 and $900.00.

Assessing Growth Trajectory

Netflix anticipates robust growth propelled by a paid-sharing initiative and augmented revenue streams from advertisements. Analysts opine that Netflix’s crackdown on password sharing successfully lured in new subscribers.

The streaming colossus ventured into live events and sportscasting this year, infiltrating traditional television realms. Plans are underway to live-stream National Football League (NFL) games on its platform this festive season. Pundits speculate that this foray into live engagements could mitigate subscriber turnover and draw in fresh viewers.

Netflix foresees a 13.9% upswing in revenues to $9.73 billion and a projected earnings per share of $5.10 for Q3. Additions to its subscriber base in the third quarter are forecasted to be more subdued compared to the same period last year.

Valuing the Valuation

At current levels, Netflix’s shares appear lofty, boasting a P/E ratio of 37.81 versus the industry’s 10.60. Despite this, a robust Growth Score of B indicates the company is poised for extended expansion, justifying its premium valuation.

Thrust on ETFs

MicroSectors FANG+ ETN (FNGS)

MicroSectors FANG+ ETN shadows the NYSE FANG+ Index performance, a well-balanced index designed to offer exposure to a basket of heavily traded growth stocks in next-gen technology and tech-enabled firms. Netflix claims a 10% share in the 10-stock portfolio, equally weighted.

With assets amassing $380 million, MicroSectors FANG+ ETN levies 58 bps in annual fees, trades at 154,000 shares per day on average, and bears a Zacks ETF Rank #3 (Hold).

Invesco Next Gen Media and Gaming ETF (GGME)

Invesco Next Gen Media and Gaming ETF renders a spotlight on companies deeply connected to technologies or products shaping future media landscapes, directly contributing to revenue streams. Tracking the STOXX World AC NexGen Media Index, it embraces 89 equities, with Netflix securing an 8% share in the asset pool.

With asset accretion at $41.1 million, Invesco Next Gen Media and Gaming ETF charges 60 bps in annual fees and holds a Zacks ETF Rank #3.

First Trust Dow Jones Internet Index Fund (FDN)

First Trust Dow Jones Internet Index Fund mirrors the Dow Jones Internet Composite Index, providing exposure to the expansive internet sector. The ETF houses approximately 41 stocks, with Netflix reigning as the third-largest holding, commanding 7.8% of the fund.

With an AUM of $6 billion and a daily volume averaging around 218,000 shares, First Trust Dow Jones Internet Index Fund is a premier and liquid ETF in the wide technology sphere. Charging 51 bps annually, FDN flaunts a Zacks ETF Rank #1 (Strong Buy), bracing for high-risk endeavors.

Communication Services Select Sector SPDR Fund (XLC)

Communication Services Select Sector SPDR Fund extends exposure to enterprises spanning telecommunication services, media, entertainment, and interactive media & services, with asset build-up at $18.2 billion. It shadows the Communication Services Select Sector Index, hosting 22 equities, with Netflix securing the fourth position with a 6.1% share.