NFLX - earnings this thursday AH

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Disclaimer first: I am retarded. Am not a financial advisor.

What do they do? Streaming service
How do they make money? Time based subscription
Why are they important? The first big stream based provider with largest user base (+200m)
What are their products? Select choice of digital media old and new, originals and exclusives

Pro’s:
Strengths? The first to market advantage, +200m subscribers and growing

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STATISTA.

Moat? Better subscriber growth than Disney. https://www.cnbc.com/2021/11/10/disney-netflix-and-other-streaming-services-subs-arpu-q3-2021.html

Much better profit per share (3.19 vs 0.09 DIS)

Valuation: EV/EBITDA
NFLX - 15.10
DIS - 34.63

Advantages?
Opportunities? Netflix is currently at a bottom of a swing since the last ER. It seems a lot of hopium died down after the push to $700. This could be a very good opportunity for a value play catalyzed by earnings.
Growth?
" Netflix’s North American subscriber base is over 73 million (Netflix, 2021). The streaming giant managed to bring in 37 million new memberships in 2020 despite facing more competition. Thanks to its string of top-shelf programs like Queen’s Gambit and Emily in Paris , it received 8.2 million new subscribers in the fourth quarter of 2020 to bring its subscriber count to over 200 million, fending off competitors like Disney Plus and HBO Max."

Likely to go over 210m next quarter.

Catalysts? Value-play / Earnings

Con’s:
Downside?
Netflix raised monthly subscription price.
"The standard plan — which allows for two streams at the same time and HD streaming — went up from $13.99 to $15.49 per month in the United States.

The price of Netflix’s premium plan, which allows for four streams at a time and streaming in ultra HD, was increased from $17.99 to $19.99 per month."

This will likely put a downward pressure on number of subscribers. Netflix may be confident that raising price will still retain subscribers and raise the profits.

Negatives? TBA
Concerns? TBA
Weaknesses? TBA
Threats? TBA (worth mentioning NFLX has many competitors)
Risks? TBA

I welcome any bull/bear case from others to add onto this earnings DD.
As always, this isn’t financial advice, play at your own risk.

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The huge cliff of DIS is their earnings I believe.

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Stumbled upon a bear case for NFLX while scrolling Reddit. Haven’t read it but figured it might help!

https://reddit.com/r/Vitards/comments/s7hgfg/my_bear_case_for_netflix/

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That didn’t work but here is er whisper:

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I have been watching this as well. Not sure but more to add. Thanks

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I dont know if I wholly agree with “I estimate that the growth will be around 5-6 million. If this is the case the stock will fall sharply, as the whole valuation foundation is built on NNM growth.” but worth considering.

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Adding this for historical context. Looks like they typically dump after earnings. “T” is the earnings date, but they report AH so look at T+1 for main changes after earnings. All of these are % changes from close to close each day.

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Really looks like there is no correlation with EPS lol

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Agreed. This chart doesn’t take into account all the surrounding sentiment of the industry and any news. That jump was during covid, and I haven’t checked if there were other factors at play. But Netflix in general seems like they dump post earnings.

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Have we considered the product that NFLX sells? Mainly content. Production delays during this last omicron rush could be included in guidance. Not just LA but Korea has become a major source for content and they have been seeing a surge there as well.

Sorry posted wrong link!

https://www.latimes.com/entertainment-arts/business/story/2022-01-05/omicron-hinders-hollywoods-return-to-business

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Market sentiment from options

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I was wrong! congrats to those who played puts. seems like NFLX subscriber edition didnt beat the expected enough.

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I just realized this morning that netflix dropped to roughly their May 2020 price.

Combined with the stocks we saw drop to the same price date last earnings quarter, this seems too much of a coincidence. Perhaps more of these COVID pumped stocks that survived last round are finally going to get corrected?

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Perhaps, but which are Covid stocks that survived last round? Many did correct.

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I noticed the same thing and Im looking at RH its had the same downward trend as Netflix. I know its a different industry but it (RH)was obviously helped by covid and stimulus checks. The RH call last time was AWFUL

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Hmmm RH call awful and the spiked up (and then came down, I know Conq 10x on puts after ER). So maybe same strategy? See if it spikes and buy puts after?

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RH was why Conq thought we should start splitting ER plays into 3 parts. The runup (and selling before ER to capture gains and IV), gamble on the ER itself (small lotto play), then listening to the call and playing the aftermath.

Had we done something like that, RH would have been a roaring success. You’ll miss out on becoming a millionaire on something like what happened to NFLX, but NFLX paid handsomely for a small bet.

ETA: now that the server isn’t focusing all its attention on ESSC and earnings season is upon us again, I think we can capture a few amazing plays with this.

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