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

Zacks Equity Research
·3 min read

Netflix (NFLX) closed at $524.59 in the latest trading session, marking a -1.18% move from the prior day. This change lagged the S&P 500's 0.13% gain on the day. Elsewhere, the Dow gained 0.24%, while the tech-heavy Nasdaq added 0.15%.

Prior to today's trading, shares of the internet video service had gained 5.21% over the past month. This has lagged the Consumer Discretionary sector's gain of 5.84% and outpaced the S&P 500's gain of 2.59% in that time.

NFLX will be looking to display strength as it nears its next earnings release, which is expected to be January 19, 2021. On that day, NFLX is projected to report earnings of $1.38 per share, which would represent year-over-year growth of 6.15%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $6.60 billion, up 20.79% from the year-ago period.

For the full year, our Zacks Consensus Estimates are projecting earnings of $6.27 per share and revenue of $24.96 billion, which would represent changes of +51.82% and +23.81%, respectively, from the prior year.

Any recent changes to analyst estimates for NFLX should also be noted by investors. These recent revisions tend to reflect the evolving nature of short-term business trends. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Based on our research, we believe these estimate revisions are directly related to near-team stock moves. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

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. The Zacks Consensus EPS estimate has moved 0.1% higher within the past month. NFLX is holding a Zacks Rank of #3 (Hold) right now.

Looking at its valuation, NFLX is holding a Forward P/E ratio of 84.71. For comparison, its industry has an average Forward P/E of 9.49, which means NFLX is trading at a premium to the group.

It is also worth noting that NFLX currently has a PEG ratio of 2.82. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. Broadcast Radio and Television stocks are, on average, holding a PEG ratio of 1.3 based on yesterday's closing prices.

The Broadcast Radio and Television industry is part of the Consumer Discretionary sector. This group has a Zacks Industry Rank of 124, putting it in the top 49% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our 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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