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Should You Buy Netflix (NFLX) Ahead of Q2 Earnings?

Benjamin Rains
Netflix (NFLX) has seen its stock price soar over the last year on the back of strong subscriber numbers, international expansion, and the overall growth of internet-based TV. The question is should you buy Netflix stock before it reports its Q2 financial results after the closing bell on Monday?

Netflix NFLX has seen its stock price soar over the last year on the back of strong subscriber numbers, international expansion, and the overall growth of internet-based TV. The question is should you buy Netflix stock before it reports its Q2 financial results after the closing bell on Monday?

Overview & Subscriber Growth

Netflix is currently the undisputed champion of streaming. But Amazon AMZN has ramped up its original offerings for its Prime service. Meanwhile, both Apple AAPL and Disney DIS are set to enter the streaming TV market over the next few years, which means Netflix will face more challengers than ever before. This is precisely why the company has committed billions on new original content and marketing this year and beyond. 

Investors should note that Netflix added 7.41 million new members last quarter, which marked a 50% jump from the year-ago period and topped the company’s forecast of 6.35 million. Netflix closed the quarter with 125 million members and expects to add 6.2 million new members in the second quarter.

More specifically, the company projects it will expand its international user base by 5 million to 77.3 million in Q2. Meanwhile, it expects to add 1.2 million new users in the U.S. to bring its total to 57.9 million for an overall total of 131.2 million.

These are the three figures that investors should pay close attention to when Netflix reports, as they might determine NFLX’s performance in the short-term.

Price Movement & Valuation

With that said, shares of Netflix are up roughly 295% over the three years and approximately 145% over the past 12 months. More recently, the streaming company has seen its stock price climb 29%. However, shares of NFLX sunk over 4% during regular trading hours Friday.

Investors should note that Netflix is currently trading at 107X forward 12-month Zacks Consensus EPS estimates, which marks an insane premium compared to the S&P 500’s 17.2X. But the company is not a value play and Netflix investors know that they signed up for massive growth potential and don’t care about much else at this point.

Earnings Revisions

Moving on, investors should take a look at Netflix’s most recent earnings revision trends. NFLX has earned one downward earnings estimate revisions against zero upward changes over the last 30 days for the current quarter. Investors should also note that Netflix has only topped earnings estimates in three out of the last six quarters. 

Growth Outlook

Lastly, our current Zacks Consensus Estimates are calling for Netflix’s Q2 revenues to surge by 41.32% to reach $3.94 billion.

At the other end of the income statement, Netflix’s adjusted Q2 earnings are projected to skyrocket 433% from $0.15 per share in the prior-year period to $0.80 per share.

Netflix is currently a Zacks Rank #3 (Hold) and might be worth considering ahead of its second-quarter earnings. Netflix is set to release its Q2 financial results after the closing bell on Monday, July 16.

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