Netflix will report their earnings after the close. The analyst expectations are for
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EPS: ~$7.08 versus $4.88 last year (44.87% gain)
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Revenue: ~$11.06 billion versus 9.56 billion last year (15.7% gain)
Markets are bracing for a notable move with expectations of a 6% move.
Key watch-points include management commentary on
- ad growth,
- Subscriber engagement, and
- Margins.
While optimism is strong—supported by high price targets near $1.33k–1.4k—elevated expectations mean even minor disappointments could spark a pullback.
Price-to-Earnings (P/E) Ratios
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Trailing P/E (based on the last 12 months of earnings): approximately 59.5×
- Forward P/E (based on projected next 12 months of earnings): around 46.8
When the forward P/E ratio is lower than the trailing 12-month P/E, it typically implies:
1. Earnings are expected to grow
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The “E” in P/E is rising: Analysts project that future earnings will be higher than the past 12 months.
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For Netflix, this reflects optimism around stronger revenue from its ad-supported tier, password-sharing crackdown, and international expansion.
2. Valuation may look more reasonable going forward
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Investors are willing to pay a premium today because they expect better profitability in the near future.
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A high trailing P/E might look expensive on its own, but a lower forward P/E suggests improving fundamentals may justify the price.
3. Market confidence in growth trajectory
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The market believes that Netflix’s business model and execution will drive earnings acceleration, making current valuations sustainable.
In short:
A lower forward P/E vs. trailing P/E signals expected earnings growth and can be a positive indicator—as long as those earnings actually materialize. If earnings disappoint, the valuation could quickly come under pressure.
Looking at the stock, it is trading currently at $1269 up $19 or 1.52% on the day. For the year, the price is up 42.4%. That comes after gains of
- 83.07% in 2024
- 65.11% in 2023 and a
- Decline of -51.05% in 2022
The price hit a record on June 30 at a price of $1341.15. That becomes the obvious target on further upside momentum to get to and through.
The low price in April on the corrective move reached a low of $821.10. At current levels, the price is up 54.61% from 2025 lows.
Looking at the daily chart, the high price extended above a topside trendline connecting recent highs for a day before rotating back to the downside. That’s an indication of an overpriced market.
The subsequent move to the downside however, did stay above its 50 day moving average. The low price last week reached $1231.30 when the 50 day moving average at the time was near $1218. The current 50 day moving averages now up at $1225.95. Moving below that moving average and staying below would be needed to give sellers some confidence/control from a technical perspective/trading perspective.
A move below the 50 day moving average would imply a decline of -3.61% from current levels. That is doable on earnings or guidance disappointment.
Other downside, other targets would include the:
- Swing lows from May 19 through June 10 near $1176.28 (implies -7.22% decline)
- 38.2% retracement of the 2025 trading range at $1141.24 (implies -10.20% decline).
- Rising 100 day moving average at $1100.26 (implies -13.39% decline).
- 50% retracement at $1080.12 (would imply a -22.4% decline.
Looking at the daily chart, the price has not traded below its 200-day moving average since October 2023 when that moving average was at $375.32.The current 200-day moving average is at $982.62.
The price last sniffed the 200-day MA at the corrective low from April near $821.10. The 200-day moving average at that time was near $808. Traders leaned against that level and pushed the price sharply to the upside. The decline from the February high to the April low was a -22.68% fall.
Netflix is one of those services that has relatively inelastic demand. If the price were to go higher, I would still buy it. Also, it is one of those products that in a recession, people would forgo going out to before getting rid of their Netflix.
Cost of production and content is obviously a potential headwind, as is the ubiquitous being overbought.
Anything can happen but it is likely that on dips, buyers would still show up.
This article was written by Greg Michalowski at www.forexlive.com.