The Zacks Consumer Discretionary sector has tumbled in 2022 as consumers pull back their spending on non-essential items, down roughly 40% and widely underperforming the general market.
A titan in the sector that’s been an investor favorite, Netflix NFLX, is on deck to unveil quarterly results on October 18th, after the market close.
Netflix is a pioneer in the streaming space, evolving from humble beginnings as a small DVD-rental provider to a dominant streaming service provider.
As it stands, the company carries a Zacks Rank #3 (Hold) with an overall VGM Score of a D.
How does the streaming titan stack up heading into its print? Let’s take a closer look.
Share Performance & Valuation
It’s no secret that NFLX shares have sailed through rough waters in 2022, down more than 60% and widely underperforming the S&P 500.
Image Source: Zacks Investment Research
However, the tide has really changed over the last three months, with NFLX shares soaring more than 20% and crushing the S&P 500’s performance.
Image Source: Zacks Investment Research
While the year-to-date performance is disheartening, the recent price action has been much more positive, telling us that sellers have exhausted themselves.
Further, Netflix’s valuation multiples have fallen extensively, perhaps enticing investors with a long-term horizon.
The company’s 23.2X forward earnings multiple is a fraction of its 78.2X five-year median and nowhere near 2021 highs of 65.1X.
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NFLX sports a Style Score of a C for Value.
Quarterly Estimates
Analysts have primarily been bearish in their earnings outlook over the last several months, with two downwards revisions coming in. The Zacks Consensus EPS Estimate of $2.11 suggests a Y/Y earnings decline of roughly 34%.
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However, the company’s top-line looks to register some growth; the Zacks Consensus Sales Estimate of $7.9 billion suggests a Y/Y uptick of nearly 5%.
Quarterly Performance & Market Reactions
NFLX has posted strong bottom-line results as of late, exceeding the Zacks Consensus EPS Estimate by double-digit percentages in each of its last four quarters. Just in its latest print, the streaming titan registered a 10.3% EPS beat.
Top-line results have been a bit disheartening recently – NFLX has fallen short of the Zacks Consensus Sales Estimate in three of its last four prints. Below is a chart illustrating the company’s revenue on a quarterly basis.
Image Source: Zacks Investment Research
In addition, expect shares to be volatile following the earnings release; over its last three quarterly prints, shares have moved downwards twice by double-digit percentages. However, the one exception was its latest print – shares moved upwards by nearly 14% following the release.
Putting Everything Together
NFLX shares have experienced harsh price action in 2022, but as of late, they’ve easily outperformed the S&P 500.
Valuation multiples have fallen extensively, with the company’s forward earnings multiple sitting nowhere near historic levels.
Analysts have primarily been bearish, and estimates reflect an uptick in revenue but a decrease in earnings.
NFLX has posted strong bottom-line results as of late, but top-line results have primarily come in under expectations.
Heading into the quarterly release, Netflix NFLX carries a Zacks Rank #3 (Hold) with an Earnings ESP Score of -1%.
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Netflix, Inc. (NFLX): Free Stock Analysis Report
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