Netflix stock pre-earnings: Is the upside already priced in?

00:00 Speaker A

We are cranking it up a few extra gears with Stock of the Week. I’m locked in on Netflix ahead of its July 17th earnings report. What’s caught my attention is that the stock has been underperforming the broader market rally this month. Shares are down five and a half percent in July while the S&P 500 is up 1.7%. Judging by the Wall Street commentary out there, analysts aren’t making too much of this trend divergence though. Needham analyst, Laura Martin, is out today raising her target price on Netflix to $1500 from $1126. She says she remains impressed with Netflix’s global scale and stable content spending. Jumping into the Yahoo Finance platform, you can see Martin isn’t alone in her bullishness. The street has hiked its 2025 EPS estimate on Netflix by 79 cents compared to just 90 days ago. They have also lifted their 2026 EPS estimate by 60 cents during that same time span. Still with me, my round table Larry Tenterelli, Steve Sosnick, and Inez Ferre. Uh, Inez, I want to go to you here on Netflix out of the jump. Netflix, I can understand why these estimates have climbed. Really for the better part of two years, Netflix has come out here and they have completely destroyed, crushed, hammered, however you want to put it, earnings estimates, and they have come out and raised guidance. I’m trying to think, why won’t that happen again, given how popular the platform is?

02:24 Inez Ferre

Well, certainly you have a lot of Wall Street that believes that they can continue to outperform as a company. I mean, they’ve had their password share crackdown. They’ve had their ad tiers that has done very well. They are pushing into live sports. So there’s a lot of reasons why the street is bullish on the stock that and you mentioned the sort of underperformance this week, but look, if you take a look at a year to date chart and you take a look at where it’s come from the April lows, you have Seaport Global that has been that noted this when they actually lowered their rating to neutral because they said, “It’s a lot that’s baked into the stock right now. And on evaluation standpoint, they’re saying, let’s just wait to for for management to execute on everything that is now priced into the share into these shares because they’ve gone up since those April lows, almost 50%.”

04:01 Speaker A

Larry, let me get over to you here. The stock has underperformed in July. Any concern or red flag on your part there ahead of earnings?

04:24 Larry Tenterelli

No, that’s part of the rotation that I discussed that started on July 1st. The chart that you just put up showed a sharp pullback in Netflix on July 1st. And we saw that with quite a few of the high momentum stocks and money moved into small caps, healthcare, home builders. And I I think it’s a normal sector rotation. Fund managers have made a lot of money this year in tech and some of these growth stocks. And I think it’s a normal rotation to book some gains and then reallocate into underperformers. Netflix is a very strong long-term uptrend. It could always consolidate after nearly a 50% move off the lows, but the long-term trend is very strong.

05:20 Speaker A

Hey Larry, that’s what I’m trying to get at. Is it, is the stock become so priced for perfection? Even if Netflix comes out again, beats on earnings, maybe the street’s just continue to inclined to sell this name.

05:37 Larry Tenterelli

That’s possible. There there’s a lot of gains in a stock like Netflix that could be booked. So as a trend follower, I’m going to stay with the weekly trend, which is strong, but a lot of these stocks have had big run-ups. So if there was some profit taking into earnings or after earnings, as long as they stay over the 50-day moving average, it really wouldn’t concern me.

06:04 Speaker A

Steve, last word to you. Is Netflix perhaps one of the most perfect stocks in the market? Uh, they had Squid Games, the finale drop at the end of the quarter. This is going to be the first full quarter where they raise prices on folks. So their profit should look pretty good. And oh yeah, there’s no tariff exposure.

06:39 Steve Sosnick

Oh, it’s certainly been a beneficiary for all the reasons you’ve suggested and both and Inez and Larry both made great points about like the the year-to-date performance and also sort of the um, end of the second quarter markup fading uh, at the as of the 1st of July. Um, but I do think, you know, it’s proven to be a very price inelastic stock. I know that I’ve tried to cancel it and my wife and kids have revolted every time I try. Can’t cancel Netflix, Steve. What are you doing, man?

07:39 Steve Sosnick

I don’t watch it. My family does. I watch other stuff. I watch more sports than Netflix, but what ends up happening is they they they rebelled and said, “Absolutely not.” And so I think they’re, you know, this company, every time they’ve tried to do something that people thought might scare off customers, it hasn’t. The question now is, is it priced, is it priced to perfection, or is it priced beyond perfection? Uh, the trends are certainly very strong. Um, it’s been a great company and the, you know, but but as with many things market-related, have we gotten we’ll find out when the earnings come out if we’ve gotten a bit ahead of our skis, um, in terms of expecting another round of perfection. But boy, the market since the last earnings, uh, the market’s really repriced this stock in a very positive way.