Netflix stock (NFLX) is a big mover this morning upon releasing its Q3 earnings report Tuesday after market hours. They blew expectations out of the water in terms of net subscriber additions – and they beat estimated EPS and revenue, too.
While analysts were projecting $7.85b in revenue, Netflix produced $7.93 in the third quarter. They also beat adjusted EPS estimates of $2.22 by coming in at an actual adjusted EPS of $3.10. But the real metric that has investors and analysts excited is the subscriber net additions.
Wall Street’s belief was that the streaming service would pull in 1 million net subscriber additions in the quarter. The streaming company more than doubled this projection with 2.41 million net additions.
It’s no secret that the first half of the year was abysmal for Netflix – as it was for most publicly traded companies. The stock price bottomed out in May of this year at around $166/share – which was down over 70% at the time. Since then, they’ve fought tooth and nail to change the trajectory and have steadily begun their climb back in the right direction.
The company issued a statement along with its earnings report addressing this. They noted that the first half of the year was brutal – but that they believe the company is on track to regain the title as the #1 streaming service – after Disney surpassed Netflix in subscribers earlier this year.
In the public statement, Netflix acknowledged that the strategy they’re employing is one that focuses on pleasing subscribers. Rather than chasing subscriptions and engagement, they’ve doubled down on production. Part of the boost the streaming service has seen was the result of hit shows like Stranger Things, the Jeffrey Dahmer Story, and more.
Going back to the competition against other streaming services, Netflix mentioned that their estimations show other platforms are going to lose money in 2022 – whereas Netflix themselves are expecting a profit of $5-6b. And that’s partially due to the upcoming release of their new subscription tier. We talked about this at length in our discussion of what Netflix is doing that has analysts excited.
This was the beginning of the turning point for Netflix back in September. At the time, the company’s price had risen back to around $237/share. As a result of yesterday’s earnings report, though, Netflix soared to a high of $278 at market open this morning. After leveling off a bit, the stock price is up 14% still as of 12 pm EST.
Now – as an investor, you may be wondering if this is the moment you’ve been waiting for. The tides have turned for Netflix stock – is it time to buy? The VectorVest stock analysis software can provide you with a precise buy, sell, or hold recommendation – keep reading to find out what your next move should be…
Does the Very Good Timing Outweigh Poor Long-Term Price Appreciation Potential?
The VectorVest stock forecasting software allows you to invest in confidence through a simplified, tried-and-true form of stock analysis. You can rely on just three easy-to-understand ratings for every move you make in the stock market: relative value (RV), relative safety (RS), and relative timing (RT).
These are put on a scale of 0.00-2.00 for effortless interpretation. The closer to 2.00, the better stock is performing – and vice versa. Based on the culmination of these ratings, the system provides you with an overall rating and a recommendation to buy, sell, or hold the stock. This will transform the way you invest forever. So, what’s the current situation with Netflix through the VectorVest lens?
- Poor Upside Potential: Despite the impressive earnings report and the excitement surrounding the upcoming ad-supported tier, VectorVest doesn’t see much long-term price appreciation potential for NFLX. In fact, the RV rating of 0.82 is considered poor on a scale of 0.00-2.00.
- Good Safety: Taking into account NFLX’s financial consistency and predictability, debt-to-equity ratio, and business longevity, VectorVest calculates an RS rating of 1.14 – which is good on a scale of 0.00-2.00.
- Very Good Timing: Relative timing takes a deep look at the direction, dynamics, and magnitude of a stock’s price movement. It analyzes movement day over day, week over week, quarter over quarter, and year over year. And as you can imagine, the timing for NFLX is very good right now – with an RT rating of 1.29.
The overall VST rating for NFLX is 1.12 – which is good. But does the very good timing outweigh the poor upside potential and earn NFLX a buy – or should you hold off a bit longer? VectorVest can give you a clear answer on your next move with this stock – but you’ll have to get a free stock analysis here to discover it.
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VectorVest advocates buying safe, undervalued stocks, rising in price. As for NFLX, it is overvalued with poor upside potential – but has good safety and very good timing.
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