The American streaming and media giant, Netflix Inc. (NASDAQ: NFLX), delivered a mixed set of financial results in its most recent quarterly earnings call “as the streaming video pioneer faces signs of market saturation,” with revenue and profits for the first quarter arriving roughly in line with general market consensus estimates.
The video streaming pioneer posted diluted earnings per share (EPS) figure of $2.88 for the quarter that ended 31 March 2023, marginally beating analyst estimates of $2.87 but falling short of last year’s quarterly figure of $3.10 per share. For the quarter ending 31 December 2022, Netflix shareholders were stunned to see a near 77% miss on EPS expectations. Market participants should be pleased to see a recovery in the company’s bottom-line figure, but headwinds prevail. Moreover, Netflix posted a quarterly revenue figure of $8.16 billion, slightly below analyst expectations of $8.18 billion.
Undoubtedly, America’s original on-demand video streaming provider, Netflix, faces significant challenges “in its pursuit of growth” as competition intensifies. Over the most recent quarterly period, the company “added 1.75 million streaming subscribers, missing analyst estimates of 2.06 million additions.” Despite plans to mitigate password-sharing, Netflix has delayed the full expansion and “rollout of its password-sharing crackdown.” Still, the streaming giant has emphasised that it remains “on track to meet [its] full year 2023 financial objectives.” With the company already introducing its lower-priced ad-supported streaming service in 12 countries in the fourth quarter of last year, the password-sharing crackdown could drive users to the “lower-priced version of the service” as Netflix ramps up efforts to mitigate password-sharing between users.
Technical Analysis:
The price action on America’s favourite streaming service provider has been in an uptrend since June last year, testing the resistance level at $350.00 (black dotted line) in early April and recently retracing toward lower levels. Shares in Netflix initially collapsed more than 10% on Tuesday, 18 April, but recovered in post-trading activity. The 1D price action chart on Netflix shows a symmetrical triangle pattern formation, which could signal a breakout in either direction.
For the bull case, a short-term trading opportunity could exist if the price action pushes above $350.00, which could be the first resistance point in the price for the bulls. Should the price breach this resistance level, the share price could reach $372.00 (green line), the primary price resistance level.
The bears could be looking toward a lower breakout of the triangle from the $313.00 support level (black dotted line) to the next level of support around the $293.00 (black dotted line) or $277.00 (red line) support levels.
Summary:
Whether Netflix’s “crackdown on password-sharing” and its ad-supported service have the desired effects on its bottom line, the possibility could exist for a long above $350.00 to the next significant resistance at $372.00. For a lower triangle, the breakout price could potentially move lower to $313.00, $293.00, and $277.00, respectively.
Sources: Bloomberg, CNBC, Reuters, Netflix Inc., Trading View
Disclaimer: Trive South Africa (Pty) Ltd, Registration number 2005/011130/07, and an Authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act 2002 (FSP No. 27231). Any analysis/data/opinion contained herein are for informational purposes only and should not be considered advice or a recommendation to invest in any security. The content herein was created using proprietary strategies based on parameters that may include price, time, economic events, liquidity, risk, and macro and cyclical analysis. Securities involve a degree of risk and are volatile instruments. Market and economic conditions are subject to sudden change, which may have a material impact on the outcome of financial instruments and may not be suitable for all investors. When trading or investing in securities or alternative products, the value of the product can increase or decrease meaning your investment can increase or decrease in value. Past performance is not an indication of future performance. Trive South Africa (Pty) Ltd, and its employees assume no liability for any loss or damage (direct, indirect, consequential, or inconsequential) that may be suffered from using or relying on the information contained herein. Please consider the risks involved before you trade or invest.
