Netflix, Inc. (NASDAQ: NFLX) is set to report its Q4 earnings after the bell today, carrying a heavy burden of investor expectations with investor attention focused on subscriber growth, profitability metrics, and the effectiveness of its new initiatives like the ad-supported tier and crackdown on password sharing.
Analysts expect Netflix to add around 9 million subscribers in Q4, bringing the total for 2023 to approximately 24 million. This would be a solid performance, but investors will be keen to see if the company can maintain its momentum in an increasingly competitive streaming landscape.
Netflix is expected to see its operating margin reach 20% for the full year 2023, the high end of its previous guidance. However, average revenue per member (ARM) is likely to remain weak in the fourth quarter before rebounding later in the year as the ad tier takes effect and price hikes come into play.
Investors will be watching closely to see how well Netflix’s new initiatives, such as the ad-supported tier and crackdown on password sharing, are performing. The ad tier has already surpassed 23 million monthly active users, but how much revenue it is generating and how many of these users will convert to paying subscribers remain to be seen.
Technical
On the daily chart, Netflix’s current price is $485.71, trading slightly flat ahead of the highly anticipated Q4 earnings release. The stock trades above the upward-sloping 50-SMA (blue line), 100-SMA (orange line), and 200-SMA (red line) within an ascending triangle trading pattern, suggesting underlying bullish momentum.
Positive earnings and outlook could offer short-term trading opportunities as the price action pushes towards the $503.15 resistance level above. A break above the $503.15 price level would, even though a potential for retest of the initial resistance exists, bring the $520.73 cents resistance level firmly into play if the break is sustained.
However, a break below the triangle would leave the 23.60% Fibonacci retracement level ($465.73) as the next significant level of support. A break below the 23.60% Fibonacci retracement level would leave the 38.20% Fibonacci retracement level ($442.58) and 50.00% Fibonacci retracement level ($423.86) as the next levels of significance in the short term.
Summary
Netflix’s Q4 earnings release is a pivotal moment for the streaming giant. While the fundamentals suggest continued growth and profitability, the high valuation and stretched margins leave room for potential downside. Technically, the stock is poised for a potential breakout above $503.15, but a break below the triangle could trigger a pullback, with the $465.73 support likely to act as a pivotal level.
Sources: TradingView, Trading Economics, MT Newswire, Benzinga, Tip Ranks, Guru Focus, Investing.com.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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