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Oscar or Earnings: What Will Drive Netflix ETFs Ahead?

Sanghamitra Saha

Hollywood must be going crazy now with 2020 Oscar nominations. Wall Street also has a reason to be psyched about the event.This is because if a film manages to seize a decent number of nominations, box-office or financial success is sure to follow. And if a film somehow gets a golden statuette, it has very high chances of making a killing.

Movies with Best Picture nomination from the 2008 to 2012 seasons were made on average budget of $56.9 million but registered a fantastic 55.7% increase in box office sales to $127.7 million, according to a 2014 analysis by IBISWorld.    

The data explains why Netflix NFLX shares jumped 3% on Jan 13. Yes, Netflix studio received the maximum Oscar nominations with 24 in total this year. Netflix flick "The Irishman" grabbed 10 nominations alone. Other Netflix creations with multiple nominations include "Marriage Story," "The Two Popes," and "Klaus."

Todd Phillips' "Joker" is the highest-nominated movie of the year, with 11 categories to vie for. Netflix managed to snatch nine more nominations this year than in 2019. It also received a record 34 nominations in this year’s Golden Globe, though lifted only two prizes.

If Oscar Nominations Are a Surprise, Earnings Could be a Snub

Notably, Netflix is about to report its quarterly earnings on Jan 21. The stock has a Zacks Rank #3 (Hold) and an ESP of -38.00%.The negative ESP lowers chances of a beat this reporting cycle.

The Zacks Consensus Estimate for the stock for the to-be-reported quarter is 50 cents, down 2 cents in the last seven-day period. To make matters worse, the Most Accurate Estimate stands at 31 cents, leading to negative ESP. In the past 7-day, 30-day and 60-day period, Netflix’s earnings estimates for the to-be-reported quarter were revised lower by analyst(s), while none upped the same.

The video streaming space is seeing cutthroat competition of late. Analysts believe that Netflix needs to lower the premium price it charges in comparison to those charged by its competitors like Apple AAPL and The Walt Disney Company DIS, otherwise Netflix may have to experience subscriber loss in 2020 (read: ETFs in Focus on Dull 2020 Subscriber Outlook for Netflix).

ETFs in Focus

Overall, Netflix is caught between Oscar euphoria and the likely earnings underperformance.The stock belongs to a favorable Zacks industry (placed at the top 44% of 250+ industries).

If investors want to bet on Netflix’s solid Oscar nominations and also want to stay away from direct stock exposure due to negative ESP, NFLX-heavy ETFs come across as good bets.

Netflix has considerable exposure to ETFs like Invesco NASDAQ Internet ETF PNQI, First Trust Dow Jones Internet Index FDN, Communication Services Select Sector SPDR XLC and Vanguard Communication Services ETF VOX. These ETFs may be tapped for Netflix exposure in a basket approach. These ETFs outperformed NFLX stock clearly in the past one year.

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Click to get this free report The Walt Disney Company (DIS) : Free Stock Analysis Report Netflix, Inc. (NFLX) : Free Stock Analysis Report Apple Inc. (AAPL) : Free Stock Analysis Report Vanguard Communication Services ETF (VOX): ETF Research Reports Invesco NASDAQ Internet ETF (PNQI): ETF Research Reports First Trust Dow Jones Internet Index Fund (FDN): ETF Research Reports Communication Services Select Sector SPDR Fund (XLC): ETF Research Reports To read this article on Zacks.com click here. Zacks Investment Research Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report