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Netflix (NFLX - Free Report) is set to release second-quarter 2021 results on Jul 20 after market close. Being the world's largest video streaming company, it is worth taking a look at its fundamentals ahead of the results.
The stock has underperformed the broad industry, having lost 3.6% over the past three months compared to the industry’s average decline of 1.1%. The underperformance might reverse if Netflix comes up with an earnings beat.
Image Source: Zacks Investment Research
Earnings Whispers
Netflix has a Zacks Rank #3 (Hold) and an Earnings ESP of +0.98%. According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 increases chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The online video streaming giant saw no earnings estimate revision over the past 30 days for the second quarter. The company’s earnings surprise history is unimpressive. It delivered a negative earnings surprise of 4.96%, on average, over the past four quarters. However, Netflix is expected to post massive earnings growth of 98.7% and solid revenue growth of 18.9% for the to-be-reported quarter.
Additionally, the stock belongs to a top-ranked Zacks industry (placed at the top 39% of 250+ industries) with an impressive VGM Score of B (see: all the Technology ETFs here).
The Zacks Consensus Estimate for the average target price is $611.33, with nearly 79% of the analysts giving a Strong Buy or a Buy rating ahead of the company’s earnings.
What to Watch Out for?
After disappointing first-quarter earnings results, with lesser subscriber growth, investors are keen to watch whether Netflix managed to win subscribers in the second quarter amid stiff competition from the likes of Disney (DIS - Free Report) , Apple (AAPL - Free Report) and Amazon (AMZN - Free Report) . Netflix has been benefiting from the global proliferation of Internet-connected devices and increasing consumer preference for on-demand video consumption over the Internet.
The company warned that growth will remain muted in the second quarter and is expected to reach a record low of 1 million subscribers worldwide, partly due to lack of content. In second-quarter last year, Netflix had added 10.09 million new subscribers.
ETFs in Focus
Ahead of its earnings report, investors could focus on ETFs having the largest allocation to this streaming giant. Below are five ETFs with the highest allocation to NFLX that could make compelling plays:
This ETN is linked to the performance of the NYSE FANG+ Index, which is an equal-dollar weighted index, designed to provide exposure to a group of highly traded growth stocks of next-generation technology and tech-enabled companies. It holds 10 stocks in its basket in equal proportion with Netflix share coming in at 10%. The product has accumulated $76.6 million in its asset base and charges 58 bps in annual fees. It trades in a paltry volume of 35,000 shares a day on average and a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Tesla Breaks Record on Q2 Deliveries: ETFs to Tap).
Multifactor Media and Communications ETF
This ETF targets a wide range of U.S. media and communication stocks to exploit the sector's opportunities by tracking the John Hancock Dimensional Media and Communications Index. It holds 54 stocks in its basket with NFLX taking the third spot at 5.6% share. JHCS has managed assets worth $31.5 million and charges 40 bps in annual fees. It trades in an average daily volume of under 1,000 shares.
Pacer BioThreat Strategy ETF
This fund seeks exposure to U.S. companies that provide their goods and services to the market by accomplishing one or more of the seven index themes. It tracks the LifeSci BioThreat Strategy Index, holding 51 stocks in its basket. Netflix occupies the third position with 5.1% of assets. The ETF accumulated $4.8 million in its asset base and charges 70 bps in annual fees. It trades in a paltry average daily volume of 500 shares.
Invesco Dynamic Media ETF
This fund provides exposure to companies engaged in the development, production, sale and distribution of goods or services used in the media industry by tracking the Dynamic Media Intellidex Index. It holds 31 stocks in the basket with Netflix taking the fifth position holding 5.2% allocation. The product has been able to manage $123.5 million in its asset base while sees a lower volume of about 31,000 shares a day. It has 0.63% in expense ratio and a Zacks ETF Rank #3 with a Medium risk outlook (read: ETF Investment Strategies for Second Half of 2021).
Invesco S&P 500 Equal Weight Communication Services ETF
This fund follows the S&P 500 Equal Weight Communication Services Plus Index. It holds 27 stocks in its basket with Netflix occupying the second position at 5.1%. The product has amassed $50.9 million in its asset base and trades in an average daily volume of 13,000 shares. It charges 40 bps in annual fees and has a Zacks ETF Rank #2 (Buy).
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ETFs to Watch Ahead of Netflix Q2 Earnings
Netflix (NFLX - Free Report) is set to release second-quarter 2021 results on Jul 20 after market close. Being the world's largest video streaming company, it is worth taking a look at its fundamentals ahead of the results.
The stock has underperformed the broad industry, having lost 3.6% over the past three months compared to the industry’s average decline of 1.1%. The underperformance might reverse if Netflix comes up with an earnings beat.
Image Source: Zacks Investment Research
Earnings Whispers
Netflix has a Zacks Rank #3 (Hold) and an Earnings ESP of +0.98%. According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 increases chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The online video streaming giant saw no earnings estimate revision over the past 30 days for the second quarter. The company’s earnings surprise history is unimpressive. It delivered a negative earnings surprise of 4.96%, on average, over the past four quarters. However, Netflix is expected to post massive earnings growth of 98.7% and solid revenue growth of 18.9% for the to-be-reported quarter.
Additionally, the stock belongs to a top-ranked Zacks industry (placed at the top 39% of 250+ industries) with an impressive VGM Score of B (see: all the Technology ETFs here).
The Zacks Consensus Estimate for the average target price is $611.33, with nearly 79% of the analysts giving a Strong Buy or a Buy rating ahead of the company’s earnings.
What to Watch Out for?
After disappointing first-quarter earnings results, with lesser subscriber growth, investors are keen to watch whether Netflix managed to win subscribers in the second quarter amid stiff competition from the likes of Disney (DIS - Free Report) , Apple (AAPL - Free Report) and Amazon (AMZN - Free Report) . Netflix has been benefiting from the global proliferation of Internet-connected devices and increasing consumer preference for on-demand video consumption over the Internet.
The company warned that growth will remain muted in the second quarter and is expected to reach a record low of 1 million subscribers worldwide, partly due to lack of content. In second-quarter last year, Netflix had added 10.09 million new subscribers.
ETFs in Focus
Ahead of its earnings report, investors could focus on ETFs having the largest allocation to this streaming giant. Below are five ETFs with the highest allocation to NFLX that could make compelling plays:
MicroSectors FANG+ ETN (FNGS - Free Report)
This ETN is linked to the performance of the NYSE FANG+ Index, which is an equal-dollar weighted index, designed to provide exposure to a group of highly traded growth stocks of next-generation technology and tech-enabled companies. It holds 10 stocks in its basket in equal proportion with Netflix share coming in at 10%. The product has accumulated $76.6 million in its asset base and charges 58 bps in annual fees. It trades in a paltry volume of 35,000 shares a day on average and a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Tesla Breaks Record on Q2 Deliveries: ETFs to Tap).
Multifactor Media and Communications ETF
This ETF targets a wide range of U.S. media and communication stocks to exploit the sector's opportunities by tracking the John Hancock Dimensional Media and Communications Index. It holds 54 stocks in its basket with NFLX taking the third spot at 5.6% share. JHCS has managed assets worth $31.5 million and charges 40 bps in annual fees. It trades in an average daily volume of under 1,000 shares.
Pacer BioThreat Strategy ETF
This fund seeks exposure to U.S. companies that provide their goods and services to the market by accomplishing one or more of the seven index themes. It tracks the LifeSci BioThreat Strategy Index, holding 51 stocks in its basket. Netflix occupies the third position with 5.1% of assets. The ETF accumulated $4.8 million in its asset base and charges 70 bps in annual fees. It trades in a paltry average daily volume of 500 shares.
Invesco Dynamic Media ETF
This fund provides exposure to companies engaged in the development, production, sale and distribution of goods or services used in the media industry by tracking the Dynamic Media Intellidex Index. It holds 31 stocks in the basket with Netflix taking the fifth position holding 5.2% allocation. The product has been able to manage $123.5 million in its asset base while sees a lower volume of about 31,000 shares a day. It has 0.63% in expense ratio and a Zacks ETF Rank #3 with a Medium risk outlook (read: ETF Investment Strategies for Second Half of 2021).
Invesco S&P 500 Equal Weight Communication Services ETF
This fund follows the S&P 500 Equal Weight Communication Services Plus Index. It holds 27 stocks in its basket with Netflix occupying the second position at 5.1%. The product has amassed $50.9 million in its asset base and trades in an average daily volume of 13,000 shares. It charges 40 bps in annual fees and has a Zacks ETF Rank #2 (Buy).