The earnings report season is revolving again, with Netflix being one of the companies that queued to release earnings tonight. As a result of the previous quarter’s earnings report, mid- July, the Netflix stock price has continued to drop since then, and has just seen the rise in the last two weeks. The key factor that caused the share price to fall heavily is the number of new members worldwide throughout the second quarter increased by just 2.7 million from the expected 5 million numbers (total membership stood at 151.56 million members as of the second quarter earnings report).
The important factor that continuously impacts throughout the 3rd quarter is increased competition, including some interesting new players like Apple TV that will be released on November 1 and Disney Plus that will be released on 12 November (both of which should have lower membership fees). Netflix, and major competitors in markets such as HBO and Amazon, have started investing in original content. As of the first half of the year, Netflix has invested more than 6.3 billion dollars in content. With an expected annual investment budget of approximately $ 15 billion with the money invested having been acquired from the increase of new members and the membership fee increase.
Again, analysts are predicting that new member numbers will be a key variable in Netflix’s third-quarter earnings report. New international subscribers in the Q3 have been forecasted at 7 million, divided into 800,000 in the United States and 6,200,000 in other countries (while analysts at Evercore ISI have reduced their estimates to just 700,000 for new members in the United States and 6 million for members in other countries). Meanwhile earnings per share could be at $ 1.046.
If the new subscriber numbers come out better than expected, it will be beneficial for Netflix’s stock price. But if it misses expectations, price could drift and retest the low of the year.
From the technical perspective, in the weekly timeframe the price has just sprung up away from the 200-week EMA line, while in the daily timeframe the current week has seen a significant price rise above the upper trendline of the downtrend seen since mid-July. There is a Support at Friday’s open, at 266.50 and an important Support zone at the low area of the year (24 September) at 252.23. Initial Resistance is September’s peak at 299.00– 301.42. If the company achieved accuracy with its forecast, or in general a positive earnings outcome without any negative surprises on subscriptions, then asset could be seen breaking the 299.00– 301.42 barrier. If the asset sustains a move above the latter then we could see a retest of the 335.66, which coincides with the September 26 high and the 200-day SMA.
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Chayut Vachirathanakit
Market Analyst – HF Educational Office – Thailand
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