Netflix Earnings: Subscriber numbers feed into relief rally, but how far can it stretch?

NFLX stock rallies lucky 13% after announcing earnings on Tuesday.
Netflix subscriber growth helps shares stage a relief rally.
NFLX will look to the bottom as investors hope this is the end.

Ivan Brian FXStreet

Netflix (NFLX) came out with earnings after the close on Tuesday, and the horror show of previous earnings has been put behind them. The company's new advertising-supported tier is one hope for future subscriber growth, and the stock reacted well with it soaring over 14% higher at one stage in the afterhours market.

Netflix stock news

Earnings per share (EPS) came in at $3.10, which was well ahead of the consensus of $2.17. Revenue also beat estimates, $7.93 billion versus $7.84 billion. It was mainly the subscriber numbers though that cheered investors. Netflix was expected to add 1 million new subscribers for the quarter but blew that prediction out of the water when announcing 2.4 million new additions. The stock immediately surged higher and held most of those gains on Wednesday.

Revenue was affected by FX headwinds, an issue for most US companies now. Netflix said it was confident it could adjust its pricing to reflect the strong dollar. Netflix also said it will not provide guidance in the future for paid memberships. It appears this is due to the company's focus on revenue as its key metric since advertising enters its mix.

"Thank God we're done with shrinking quarters," Co-CEO Reed Hastings said. "It's a big deal to go back to the positivity...We still got FX. So that's a huge hit, as we've explained. So that's not going to go away, but other than that all the stars are lining up very well for us."

Netflix stock forecast

Our preview note from Monday was prophetic: "Netflix has been trying to bottom and has traded in a sideways range since August, so earnings could provide the catalyst for a breakout. As mentioned I believe the risk-reward lies in an upside surprise. Netflix has suffered this year already, and a lot of bad news can be assumed to already be in the price. Technically, a break higher would target $333, the earnings gap from April. There is a natural volume gap as a result."

If only I had put my money where my mouth was! That same technical setup remains in play. The earnings gap from April remains the target now on this aggressive move higher at $333. To keep the trend intact, Netflix can retrace and stabilize before charging up for a move higher, but it must hold the breakout support level at $252.

NFLX 20-hour chart

Author

Ivan Brian

FXStreet

Ivan Brian started his career with AIB Bank in corporate finance and then worked for seven years at Baxter. He started as a macro analyst before becoming Head of Research and then CFO.

GBP/USD advaces beyond 1.3450 after BoE decision, US Q2 GDP

GBP/USD gains positive momentum on Thursday, surpassing 1.3450 and trading at fresh multi-week highs. The Bank of England decided to maintain the benchmark rate unchanged at 3.75%. The MPC voted 6-3 to keep rates on hold, with the 3 dissenters favoring a rate hike. US Q2 GDP missing expectations helped the pair advance, while renewed US Dollar weakness across the FX board pushed the pair further up ahead of the monthly close.

EUR/USD confortable around 1.1530, highest in six weeks

The EUR/USD pair trades around 1.1530 in the American session on Thursday, reaching fresh six-week highs. The US Dollar is in sell-off mode, with multiple factors weighing on the American currency. Not only did the Federal Reserve vote divided to keep rates on hold on Wednesday, creating doubts about a September hike, but US Q2 GDP missed expectations. A suspected JPY intervention adds pressure on the Greenback.

Gold recovers the $4,100 level as US Dollar weakens further

Gold trades just above $4,100 amid a US Dollar sell-off. The Greenback enjoyed some near-term demand following Wednesday's post-FOMC downfall, but was unable to retain its gains. The preliminary estimate of the US Q2 GDP showed the economy grew at an annual rate of 1.5%, missing the market's expectations of 2.1%.

Bank of Japan set to keep interest rates unchanged after suspected Yen intervention

Investors are turning their attention to the Bank of Japan’s monetary policy announcement on Friday, after the Japanese Yen staged a dramatic rebound during Thursday's American session. The move came amid growing speculation that Japanese authorities intervened in the foreign exchange market after USD/JPY tumbled from above 163.00 to below 158.00 within minutes.

Aave to sunset Sonic, Aptos, zkSync, Scroll reserves, affecting $98 million in supply

Aave is planning to sunset 75 low-activity reserves across its decentralized finance protocol as part of a broader effort to reduce operational, technical and economic risks across its network of deployments.

9-3: Is the Federal Reserve’s vote tally Warsh's new forward guidance?

The rate did not move. Neither did the statement, and that’s the more interesting fact. Set the July 29 Federal Open Market Committee (FOMC) statement beside the one issued on June 17, and the two documents are identical apart from a single verb and a paragraph at the bottom naming three dissenters.