Netflix Earnings Preview: A Diamond in the Magnificent 7 Rough

Amid Wall Street volatility, most “Magnificent 7” stocks have suffered violent drawdowns thus far in 2025. However, Zacks Rank #3 (Hold) stock Netflix (NFLX) has bucked the market weakness ahead of its Q1 earnings release on Thursday. While Netflix is consistently overlooked versus its big tech peers, there are five key reasons investors should not forget about the leading streaming giant, including:1. Netflix is Mostly Immune from TariffsA centerpiece of President Donald Trump’s second term is to decrease reliance on the international market, decrease (and ultimately balance) trade deficits, and make trade fairer for the United States. However, the Trump Administration’ssomewhat confusing and everchangingtariff policy isone of the most signficant question marks for “Magnificent 7” stocks like Amazon (AMZN), Microsoft (MSFT), Apple (AAPL), Nvidia (NVDA), and Tesla (TSLA). Each of these companies has significant production and parts sourced from overseas, subjecting them to tariffs.Netflix, on the other hand, is the only big tech stock that is largely unaffected by the uncertainty surrounding the current trade policy. Digital services like Netflix are currently not a top priority for the Trump Administration because the United States already enjoys a large trade surplus in digital services. In addition, digital goods are not beholden to tariffs under the World Trade Organization (WTO) policy.2. Netflix is the Fastest Growing Mag 7 NameLast quarter, Netflix earnings bolted 102% year-over-year, making it the fastest-growing Mag 7 name. Despite intense competition from Amazon’s Prime, Alphabet’s (GOOGL) YouTube TV & YouTube Premium, and the Disney (DIS) Plus streaming services, Netflix’s management has done a masterful job of growing the company. Here’s how:Password Sharing Crackdown: For years, Netflix customers enjoyed a loophole that allowed them to share Netflix subscriptions with friends. However, in mid-2023, Netflix finally cracked down on password sharing. The results? NFLX recorded its highest use acquisition days in history.Content Powerhouse: Against all odds, Netflix has transformed from a streaming service to a major movie studio with wildly popular “Netflix Originals” like Bird Box andThe Irishman. Over the past few years, Netflix has capitalized further by investing more money into originals and attracting well-known Hollywood stars. In addition, Netflix is attracting broader viewership through regional programming bolstered by partnerships with Verizon (VZ) and AT&T (T). International Growth: In recent quarters,Netflix has expanded its international footprint to markets like India Mexico, and Spain. As Netflix slowly attracts new customers its international advertising revenue should soar.Higher Prices: In January, Netflix increased prices on its standard, ad-free, premium ad-free, and extra member subscriptions. Though consumers never like paying higher prices, Netflix’s broad and expanding content library gives the company best-in-breed pricing power.Image Source: Zacks Investment Research3. Netflix’s Historically Low Valuation Though NFLX shares have performed well over the past few years, shares are cheap. NFLX’s price-to-earnings ratio of 46.96x means shares are hovering near their “cheapest” levels over the past decade. While a 46 p/e may seem high to investors, context is essential. Because Netflix  highest and most consistent growth versus “Mag 7” names, investors are willing to pay a premium.Image Source: Zacks Investment Research4. Netflix Exhibits Relative StrengthThe best time to look for long-term RS opportunities is within a bear market. New, inexperienced investors tend to get frustrated and give up during bear markets. Conversely, savvy investors understand that bear markets present easily identifiable extremes. Because 75% of stocks follow the general market’s direction, you would expect most stocks to fall amid tariff concerns. However, NFLX shares have recently decoupled from the Mag 7 and the general market. While all Mag 7 names and the Nasdaq 100 Index (QQQ) are stuck below their 200-day moving averages, NFLX has carved out a picture-perfect double-bottom base structure above it – a sign of relative price strength.Image Source: TradingView5. Bullish Earnings Surprise HistoryNetflix has a bullish earnings surprise history, beating Zacks Consensus Analyst Estimates for four consecutive quarters.Image Source: Zacks Investment ResearchThough NFLX is positioned well, there are some concerns on the bearish side. First, Wall Street analysts have soured on the company over the past few months, leading to a negative Zacks Earnings Expected Surprise Prediction (ESP) score. Second, the general market environment remains uncertain.Bottom LineWhile most “Magnificent 7” and big tech stocks have experienced significant declines amidst Wall Street’s volatile start to 2025, Netflix stands out as a resilient performer ahead of its upcoming Q1 earnings report on Thursday. This strength is due to several factors, including its insulation from tariffs, leading growth rate, historically low valuation, relative price strength, and consistent earnings surprise track record.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.9% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>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 Amazon.com, Inc. (AMZN): Free Stock Analysis Report AT&T Inc. (T): Free Stock Analysis Report Apple Inc. (AAPL): Free Stock Analysis Report Microsoft Corporation (MSFT): Free Stock Analysis Report Verizon Communications Inc. (VZ): Free Stock Analysis Report Netflix, Inc. (NFLX): Free Stock Analysis Report NVIDIA Corporation (NVDA): Free Stock Analysis Report The Walt Disney Company (DIS): Free Stock Analysis Report Tesla, Inc. (TSLA): Free Stock Analysis Report Invesco QQQ (QQQ): ETF Research Reports Alphabet Inc. (GOOGL): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks