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Netflix (NFLX) Dips More Than Broader Markets: What You Should Know

Zacks Equity Research
·3 min read

Netflix (NFLX) closed the most recent trading day at $527.33, moving -0.3% from the previous trading session. This change lagged the S&P 500's daily loss of 0.21%. At the same time, the Dow lost 0.67%, and the tech-heavy Nasdaq gained 0.51%.

Heading into today, shares of the internet video service had gained 10.97% over the past month, outpacing the Consumer Discretionary sector's gain of 7.67% and the S&P 500's gain of 4% in that time.

Wall Street will be looking for positivity from NFLX as it approaches its next earnings report date. This is expected to be January 19, 2021. The company is expected to report EPS of $1.37, up 5.38% from the prior-year quarter. Our most recent consensus estimate is calling for quarterly revenue of $6.60 billion, up 20.79% from the year-ago period.

NFLX's full-year Zacks Consensus Estimates are calling for earnings of $6.26 per share and revenue of $24.96 billion. These results would represent year-over-year changes of +51.57% and +23.81%, respectively.

It is also important to note the recent changes to analyst estimates for NFLX. These revisions typically reflect the latest short-term business trends, which can change frequently. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

Ranging from #1 (Strong Buy) to #5 (Strong Sell), the Zacks Rank system has a proven, outside-audited track record of outperformance, with #1 stocks returning an average of +25% annually since 1988. The Zacks Consensus EPS estimate has moved 0.02% higher within the past month. NFLX currently has a Zacks Rank of #3 (Hold).

Digging into valuation, NFLX currently has a Forward P/E ratio of 84.45. This valuation marks a premium compared to its industry's average Forward P/E of 9.19.

Investors should also note that NFLX has a PEG ratio of 2.82 right now. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. NFLX's industry had an average PEG ratio of 1.25 as of yesterday's close.

The Broadcast Radio and Television industry is part of the Consumer Discretionary sector. This group has a Zacks Industry Rank of 100, putting it in the top 40% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

To follow NFLX in the coming trading sessions, be sure to utilize Zacks.com.


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