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Investors Need to Keep an Eye on Netflix-Heavy ETFs

This article was originally published on ETFTrends.com.

Wall Street analysts are warning investors that disappointment could be forthcoming with streaming media giant Netflix when it comes time to report their third-quarter earnings.

Per a CNBC report, analysts are “have begun expressing doubts about Netflix and warning the company’s coming quarterly earnings may disappoint yet again, just after the stock turned negative for the year. Pivotal Research Group cut its price target on Netflix shares by nearly a third on Tuesday, to $350 from $515. The firm warned investors that Netflix is facing many higher-than-expected costs to license content, as well as intense competition from media and technology giants.”

“The issue lately has been the aforementioned material accelerating content costs, perceived aggressive moves by new Internet players/Apple and this has been exacerbated by increasing investor concern that subscribers in 3Q may once again be weaker than expected,” Pivotal Research analyst Jeffrey Wlodarczak said.

Even if third-quarter results are largely positive, it’s not enough to stem the tide of a weaker outlook in terms of long-term growth.

“Even good results are unlikely to address competitive fear,” said KeyBanc Capital Markets analyst Andy Hargreaves. “Weak results/guidance in 3Q could raise concerns about longer-term growth that would likely be negative for the stock. In-line or slightly better results could drive a modest relief rally, but would not likely address competitive concerns since new services do not launch until 4Q.”

“This suggests only very significant upside in 3Q is likely to drive sustainable upside in the shares, and we have little to provide confidence in that outcome,” Hargreaves added.

Netflix And Holdings

Here are three ETFs to consider with Netflix holdings:

  1. Invesco NASDAQ Internet ETF (PNQI) : The investment seeks to track the investment results (before fees and expenses) of the NASDAQ Internet IndexSM. The fund generally will invest at least 90% of its total assets in securities that comprise the underlying index. The underlying index is designed to track the performance of the largest and most liquid U.S.-listed companies engaged in Internet-related businesses that are listed on one of the three major U.S. stock exchanges.
  2. First Trust Dow Jones Internet Index (FDN) : seeks investment results that correspond generally to the price and yield (before the fund’s fees and expenses) of an equity index called the Dow Jones Internet Composite Index (SM) (the “index”). The fund will normally invest at least 90% of its net assets (including investment borrowings) in the common stocks that comprise the index. The index is designed to measure the performance of the largest and most actively traded securities issued by U.S. companies in the Internet industry. The index is a composite of its two sub-indices, the Dow Jones Internet Commerce Index and the Dow Jones Internet Services Index.
  3. AdvisorShares New Tech and Media ETF (FNG) : seeks long-term capital appreciation. The fund is an actively managed ETF that seeks to achieve its investment objective by investing, under normal circumstances, at least 80% of its net assets in securities of technology and media companies. It will invest primarily in U.S. exchange-listed equity securities, including common and preferred stock and ADRs, of technology and technology-related companies, including innovative and fast-growing technologies. The fund will concentrate its investments in the software and services industry within the information technology sector.

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