The streaming behemoth is set to release its second-quarter results after the bell on Tuesday. According to Refinitiv, analysts expect the company to earn $3.16 per share and generate $7.3 billion in revenue. In addition to those figures, here are the key metrics that will drive the stock after the bell.
Given historical trends, shareholders should be concerned about Netflix’s ability to meet those targets, as the second quarter report is typically the streaming giant’s weakest.
According to 19 years of data from Bespoke Investment Group, despite exceeding earnings projections nearly 80% of the time, Netflix frequently misses sales expectations for the quarter and averages a loss of 6.1 percent the day after the print.
In addition, only 11% of the company’s second-quarter reports raised guidance.
According to Bespoke Investment Group, Netflix has recently outperformed earnings expectations 70% of the time over the last five years, including three of the last five second quarters. However, the stock has dropped by at least 5% following each of the last three second-quarter earnings reports.
Netflix’s stock is notoriously volatile following earnings announcements. Since the beginning of 2018, the stock has had nine next-day moves of at least 5% in either direction. This includes a 16.9 percent increase following its 2020 fourth-quarter report and a 10.3 percent decline following its 2019 second-quarter report.
After a strong run during the pandemic lockdowns last year, shares of the streaming giant have dropped in 2021.
According to FactSet, 76 percent of Wall Street analysts rate Netflix as a buy ahead of the report. On Tuesday, Loop Capital Markets reiterated its buy rating on the stock.
In addition to earnings and revenue, investors should keep an eye on Netflix’s subscriber base. According to FactSet, analysts anticipate a gain of just over 1 million global subscribers for the quarter.
JPMorgan raises S&P 500
Fears about the spread of Covid-19 variants appeared to frighten traders on Monday, with the S&P500 falling more than 1.5 percent in a broad sell-off.
However, JPMorgan’s Dubravko Lakos-Bujas predicted in a note on Tuesday that the pullback would be brief. He also raised his year-end target for the S&P500 to 4,600 from 4,400, representing an 8% increase for the index.
“We remain bullish on equities and believe the latest round of growth and slowdown fears are premature and exaggerated,” the note said. “Even though equity leadership and bonds are trading as if the global economy is entering late cycle, our research indicates that the recovery is still in early-cycle mode and gradually transitioning to mid-cycle.”
Consumer discretionary, semiconductors, banks, and energy stocks, according to the strategist, are strong buys at current levels, with the reopening trade looking appealing after the pullback.
“The reopening of the economy is not an event, but rather a process that, in our opinion, is still not priced in, particularly given recent market movements. For example, “an increasing number of reopening stocks are now down 30-50 percent from 1Q21 highs (i.e. travel, cruise lines, oil), and some have reversed back to last year June levels when COVID-19 uncertainty and the economic setup were vastly worse than today,” according to the note.
Lakos-Bujas also raised his full-year S&P500 earnings-per-share estimate to $205 from $200.
The year-end target of 4,600 is on the high side of Wall Street’s S&P500 forecast. Other top strategists, such as Morgan Stanley’s Mike Wilson, have warned that the market could trade sideways or even decline in the second half.
Even after Monday’s drop, the S&P500 is still up more than 13% for the year, closing at 4,258.49 on Monday.