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Netflix (NFLX) Outpaces Stock Market Gains: What You Should Know

Zacks Equity Research
·3 mins read

In the latest trading session, Netflix (NFLX) closed at $500.03, marking a +1.33% move from the previous day. The stock outpaced the S&P 500's daily gain of 0.83%. At the same time, the Dow added 1.2%, and the tech-heavy Nasdaq gained 0.74%.

Prior to today's trading, shares of the internet video service had lost 11.33% over the past month. This has lagged the Consumer Discretionary sector's loss of 2.48% and the S&P 500's loss of 4.83% 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 October 20, 2020. In that report, analysts expect NFLX to post earnings of $2.11 per share. This would mark year-over-year growth of 43.54%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $6.37 billion, up 21.43% from the year-ago period.

For the full year, our Zacks Consensus Estimates are projecting earnings of $6.30 per share and revenue of $24.83 billion, which would represent changes of +52.54% and +23.18%, respectively, from the prior year.

Investors should also note any recent changes to analyst estimates for NFLX. Recent revisions tend to reflect the latest near-term business trends. 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. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Over the past month, the Zacks Consensus EPS estimate has moved 0.22% higher. NFLX is currently sporting a Zacks Rank of #4 (Sell).

In terms of valuation, NFLX is currently trading at a Forward P/E ratio of 78.36. Its industry sports an average Forward P/E of 9.44, so we one might conclude that NFLX is trading at a premium comparatively.

It is also worth noting that NFLX currently has a PEG ratio of 2.61. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. The Broadcast Radio and Television industry currently had an average PEG ratio of 0.64 as of yesterday's close.

The Broadcast Radio and Television industry is part of the Consumer Discretionary sector. This industry currently has a Zacks Industry Rank of 79, which puts it in the top 32% of all 250+ industries.

The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Make sure to utilize Zacks. Com to follow all of these stock-moving metrics, and more, in the coming trading sessions.


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