It’s earnings season, and Wall Street is likely wondering if Netflix (NASDAQ:NFLX) is going to show another scary-looking sequel to their last earnings report. Let’s take a sneak peek at what’s happening off and on the price chart, and what investors might look for in the quarterly event before making a purchase of NFLX stock.
SVOD giant Netflix reports third quarter earnings after the closing bell on Wednesday. Ahead of the release analysts are forecasting profits of $1.03 per share of NFLX on sales of $5.2 billion. If captured, both numbers would compare favorably to results from a year ago when earnings of 89 cents and revenues of $4 billion were delivered.
Perhaps more important, investors need to watch NFLX stock’s subscriber data. In Q2 Netflix posted a quarter-to-quarter decline of 126,000 U.S. subscribers. The unexpected and ugly surprise coupled with weak global subscriber growth took shares down more than 10% in the report’s immediate aftermath and helped fuel an additional drop of nearly 22% over the following two months.
In front of tonight’s report management has forecasted subscribers will reach 7 million compared to 2018’s 6.1 million count as it expects a return to “more typical growth.”
To be sure, the likes of Apple (NASDAQ:AAPL) with its imminent Apple TV+ launch and Disney’s (NYSE:DIS) own Disney+ platform are competitive threats. They are compounding a market and business model increasingly reliant on top quality original content that has made the NFLX stock story increasingly expensive to defend.
On that note, Netflix’s best days are almost without a doubt behind it. Still, I’m all about happy endings. Or more aptly, I’m optimistic on stock charts that promote a positive change of scenery while an overly-pessimistic audience on Wall Street boos NFLX stock in recent weeks.
NFLX Stock Monthly Chart
Over the past 15 months and on the heels of one of the market’s more memorable bull markets of the past decade, NFLX stock succumbed to the inevitable correction. Netflix’s sizable decline in shareholder value amounted to a corrective more of about 45% by last December during the broader market’s own bearish phase.
A strong rally during the first half of 2019 retraced the bulk of the correction. But much to the detriment of Netflix bulls, last quarter’s earnings-driven fallout undid most of those gains. To say the least, it hasn’t been an enjoyable period to own NFLX stock. But unlike many on Wall Street right now, the monthly chart indicates that now is not a good time to write NFLX off. In fact, it’s time to put shares on the radar for buying.
As the monthly NFLX stock chart shows, the most recent price action has formed a higher-low candlestick pivot on top of key Fibonacci support tied to the 2016 low in shares which came in front of a solid rally to all-time highs by mid-2018.
In conjunction with a monthly stochastics set-up on the cusp of a bullish crossover in oversold territory, I like NFLX stock’s chances for rallying out of this durable-looking price formation. That being said and with earnings tonight, I’d recommend investors wait for price confirmation after the event. If Netflix can find others applauding its efforts by sending shares above the September doji candlestick high of $301.55, I’m thinking a new bullish story will emerge that’s worth buying into.
Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. . For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.