Netflix Hits Play on a New Rally as Shares Soar After Earnings
Netflix just gave investors a new plot twist. After a brief pullback leading into earnings, the streaming giant delivered a standout performance, sending its shares soaring and reigniting momentum in its long-running uptrend.
A Strong Showing in Netflix’s Earnings
Netflix’s numbers comfortably beat market expectations. The company reported a 16% year-over-year increase in revenue, reaching $18.93 billion for the first six months of 2024. More impressively, net income surged 48%, reflecting both the ongoing strength of its subscriber base and successful monetization strategies, including its ad-supported tier. EPS grew by an eye-catching 62.4%, solidifying Netflix’s status as a key player in the streaming space. The earnings release reassured investors that Netflix’s growth story is far from over, leading to Friday's sharp rally.
Netflix’s Valuation Ratios Show a Premium
Despite its blockbuster growth, Netflix isn't cheap. With a forward P/E ratio of 33.6 and a price-to-free cash flow ratio of 48.1, the stock is valued at a premium compared to the broader market. But when you factor in projected EPS growth of 25.8% and its PEG ratio of 1.6, the valuation becomes a bit more palatable for growth investors. Netflix's return on equity of 31.6% and operating margin of 23.8% further demonstrate the company’s ability to turn its revenue growth into profitability, which goes some way to justifying the high multiples. Although the absence of a dividend may deter income-seeking investors, Netflix’s strategy is clear: reinvest in growth.
Technical Analysis: Breakout Backed by Volume
From a technical perspective, Netflix’s price action has been as compelling as its earnings report. Throughout 2024, the share price has carved out a strong uptrend, supported by the 50-day moving average. However, ahead of last week’s earnings release, prices pulled back to test this key level, and for a brief moment, it looked like the bulls were losing steam as Netflix broke below the 50-day MA on Thursday. But Friday’s price action flipped the script. After digesting the earnings beat, investors pushed the stock sharply higher, resulting in a gap up and a strong close near the day’s highs.
What makes this breakout particularly compelling is the surge in volume that accompanied it—confirmation that the move is likely to have staying power. Additionally, the RSI shows increasing momentum but remains below overbought levels, suggesting the rally has room to run before hitting resistance. Aggressive trend traders might look to ride this breakout, using shorter timeframes to manage risk, while others might wait for a pullback to the broken highs for a better risk-reward entry. Either way, the technicals suggest Netflix is far from running out of steam.
NFLX Daily Candle Chart
Past performance is not a reliable indicator of future results
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.67% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
A Strong Showing in Netflix’s Earnings
Netflix’s numbers comfortably beat market expectations. The company reported a 16% year-over-year increase in revenue, reaching $18.93 billion for the first six months of 2024. More impressively, net income surged 48%, reflecting both the ongoing strength of its subscriber base and successful monetization strategies, including its ad-supported tier. EPS grew by an eye-catching 62.4%, solidifying Netflix’s status as a key player in the streaming space. The earnings release reassured investors that Netflix’s growth story is far from over, leading to Friday's sharp rally.
Netflix’s Valuation Ratios Show a Premium
Despite its blockbuster growth, Netflix isn't cheap. With a forward P/E ratio of 33.6 and a price-to-free cash flow ratio of 48.1, the stock is valued at a premium compared to the broader market. But when you factor in projected EPS growth of 25.8% and its PEG ratio of 1.6, the valuation becomes a bit more palatable for growth investors. Netflix's return on equity of 31.6% and operating margin of 23.8% further demonstrate the company’s ability to turn its revenue growth into profitability, which goes some way to justifying the high multiples. Although the absence of a dividend may deter income-seeking investors, Netflix’s strategy is clear: reinvest in growth.
Technical Analysis: Breakout Backed by Volume
From a technical perspective, Netflix’s price action has been as compelling as its earnings report. Throughout 2024, the share price has carved out a strong uptrend, supported by the 50-day moving average. However, ahead of last week’s earnings release, prices pulled back to test this key level, and for a brief moment, it looked like the bulls were losing steam as Netflix broke below the 50-day MA on Thursday. But Friday’s price action flipped the script. After digesting the earnings beat, investors pushed the stock sharply higher, resulting in a gap up and a strong close near the day’s highs.
What makes this breakout particularly compelling is the surge in volume that accompanied it—confirmation that the move is likely to have staying power. Additionally, the RSI shows increasing momentum but remains below overbought levels, suggesting the rally has room to run before hitting resistance. Aggressive trend traders might look to ride this breakout, using shorter timeframes to manage risk, while others might wait for a pullback to the broken highs for a better risk-reward entry. Either way, the technicals suggest Netflix is far from running out of steam.
NFLX Daily Candle Chart
Past performance is not a reliable indicator of future results
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.67% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.