Bulls Chasing Netflix Ahead of Q1 Earnings: ETFs in Focus

Netflix NFLX is set to release first-quarter 2024 results on April 17 after the market close. It is worth taking a look at the fundamentals of the world’s largest video-streaming company ahead of its results. Netflix shares have risen about 10% so far this year, outperforming the broader industry and the S&P 500’s decline of 6.1% and 8.4%, respectively. The strong trend is expected to continue if Netflix comes up with an earnings beat. Image Source: Zacks Investment ResearchAs a result, ETFs with the largest allocation to this streaming giant like MicroSectors FANG+ ETN FNGS, Invesco Next Gen Media and Gaming ETF GGME, First Trust Dow Jones Internet Index Fund FDN, FT Vest Dow Jones Internet & Target Income ETF FDND and Communication Services Select Sector SPDR Fund XLC are in focus.Earnings WhispersNetflix has an Earnings ESP of -2.23% and a Zacks Rank #3 (Hold). According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.     The online video-streaming giant saw no earnings estimate revision over the past 30 days for the to-be-reported quarter. It is expected to report substantial earnings growth of 8.7% and revenue growth of 12.5% for the to-be-reported quarter. The company’s earnings surprise history is impressive, as it delivered an earnings surprise of 7.17%, on average, over the past four quarters. Netflix also belongs to a top-ranked Zacks industry (placed at the top 28% of 250+ industries).Netflix, Inc. Price, Consensus and EPS Surprise Netflix, Inc. price-consensus-eps-surprise-chart | Netflix, Inc. QuoteAnalysts Are Bullish Ahead of EarningsAnalysts are bullish on Netflix, with an average brokerage recommendation (ABR) of 1.66 made by 43 brokerage firms. Out of them, 28 are Strong Buy and two are Buy. Strong Buy and Buy, respectively, account for 65.12% and 4.65% of all recommendations. The average price target for Netflix comes to $1,074.53, ranging from a low of $800.00 to a high of $1,494.00.Many analysts remain optimistic about Netflix's resilience in the streaming market amid economic tariff-related uncertainties. JP Morgan called Netflix the “most resilient” company, given the streamer's strong subscriber base, with members watching an average of two hours of content per day. Morgan Stanley named Netflix a "top pick," reflecting its confidence in Netflix's business model and its ability to navigate an increasingly competitive streaming landscape.Oppenheimer reiterated its Outperform rating on Netflix with a target price of $1,150 — one of the highest on Wall Street — ahead of its first-quarter earnings. Bank of America and Evercore ISI are also upbeat on Netflix. (See the Zacks Earnings Calendar to stay ahead of market-making news.)What to Watch?For the first quarter, Netflix expects revenues to grow 11.2% year over year to $10.42 billion, while earnings per share are expected to rise 5.7% to $5.58. The ad-supported plan is a major tailwind for the company. According to Netflix, nearly half of new subscribers are opting for the more affordable, ad-backed tier, fueling user growth even as the company no longer reports quarterly subscriber additions. Still, Netflix confirmed it has surpassed 300 million global users in the first quarter, marking a 16% increase year over year.Promising OutlookAccording to the Wall Street Journal, Netflix aims to reach a market capitalization of $1 trillion by the end of the decade, a significant leap from its current valuation of approximately $419.2 billion. The company plans to double its annual revenues from $39 billion to $80 billion, signaling aggressive growth expectations likely tied to subscriber expansion, content monetization, and international market expansion. Netflix also forecasts its global advertising revenues to grow to $9 billion by 2030.With total subscribers of more than 300 million, the company aims to increase this subscriber base to approximately 410 million by 2030 by focusing on international markets, such as India and Brazil, for much of this expansion.ValuationsNetflix shares look expensive at current levels, with a P/E ratio of 38.00 versus 11.41 for the industry. However, it has a strong Growth Score of B, indicating that it is primed for more growth. This justifies its high valuation. Also, Netflix has become a popular defensive play in the current unsteady market.ETFs in FocusMicroSectors FANG+ ETN (FNGS)MicroSectors FANG+ ETN is linked to the performance of the NYSE FANG+ Index, which is an equal-dollar-weighted index. It is designed to provide exposure to a group of highly traded growth stocks of next-generation technology and tech-enabled companies. It holds 10 stocks in its basket in equal proportion, with Netflix’s share coming in at 10% (read: Should You Brace for Mag-7 ETFs Before It's Too Late?). MicroSectors FANG+ ETN has accumulated $372.8 million in its asset base and charges 58 bps in annual fees. It trades in a moderate volume of 151,000 shares a day on average and has a Zacks ETF Rank #3.Invesco Next Gen Media and Gaming ETF (GGME) Invesco Next Gen Media and Gaming ETF offers exposure to companies with significant exposure to technologies or products that contribute to future media through direct revenues. It tracks the STOXX World AC NexGen Media Index, holding 85 stocks in its basket. Netflix is the top firm, accounting for 8.7% of the GGME assets.Invesco Next Gen Media and Gaming ETF has amassed $117.2 million in its asset base and charges 61 bps in annual fees. It trades in an average daily volume of 16,000 shares and has a Zacks ETF Rank #3.First Trust Dow Jones Internet Index Fund (FDN)First Trust Dow Jones Internet Index Fund follows the Dow Jones Internet Composite Index, giving investors exposure to the broad Internet industry. It holds about 41 stocks in its basket, with Netflix occupying the second spot at 9.5%. First Trust Dow Jones Internet Index Fund is the most popular and liquid ETF in the broad technology space, with AUM of $5.8 billion and an average daily volume of around 507,000 shares. FDN charges 51 bps in fees per year and has a Zacks ETF Rank #1 (Strong Buy) with a High risk outlook. FT Vest Dow Jones Internet & Target Income ETF (FDND)FT Vest Dow Jones Internet & Target Income ETF is an actively managed fund that invests primarily in U.S. exchange-traded equity securities intended to track the Dow Jones Internet Composite Index. It utilizes an "option strategy" consisting of writing (selling) U.S. exchange-traded call options on the Nasdaq-100 Index or ETFs that track the Nasdaq-100 Index. It holds 42 stocks in its basket, with Netflix occupying the third position at 9.5% share.FT Vest Dow Jones Internet & Target Income ETF has accumulated $4.9 million in its asset base and trades in an average daily volume of about 6,000 shares. It charges 75 bps in annual fees.Communication Services Select Sector SPDR Fund (XLC) Communication Services Select Sector SPDR Fund offers exposure to companies from telecommunication services, media, entertainment and interactive media & services and has accumulated $19.2 billion in its asset base. It follows the Communication Services Select Sector Index and holds 23 stocks in its basket, with Netflix occupying the fourth position at 6.5% share. About 33% of the portfolio is allocated to interactive media & services, while entertainment and media round off the next two (read: Inside Trump Tariffs and Their Impact on Sector ETFs). Communication Services Select Sector SPDR Fund charges 8 bps in annual fees and trades in an average daily volume of 7.5 million shares. It has a Zacks ETF Rank #1.Want key ETF info delivered straight to your inbox?Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.Get it free >>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 Netflix, Inc. (NFLX): Free Stock Analysis Report First Trust Dow Jones Internet ETF (FDN): ETF Research Reports Communication Services Select Sector SPDR ETF (XLC): ETF Research Reports MicroSectors FANG+ ETN (FNGS): ETF Research Reports Invesco Next Gen Media and Gaming ETF (GGME): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks