$NFLX Earnings Preview: Is Another 60% EPS Beat Coming?
No one is paying attention to $Netflix(NFLX)$ earnings on July 16.
Last quarter, they suprised the market with a massive EPS beat by 60%.
5 reasons NFLX is turning around:
1. Ad-tech inflection Netflix is ramping its ad business through a new Omnicom partnership that fuses Acxiom audience data with Netflix's AI-powered ad formats, which is the kind of monetization lever bulls have been waiting on.
2. Cash machine, not a broken business revenue over the last year sits around $45.18B with an EBIT margin near 36% and profit margins above 28%, while free cash flow this quarter was about $5.09B. That's not a company in decline, it's a company being repriced.
3. Opportunistic capital allocation —Netflix is buying Los Angeles' Radford Studio Center for roughly $400M, a steep discount versus its $1.85B sale price in 2021 buying back infrastructure at a fraction of what they sold it for.
4. Valuation reset a price-to-earnings ratio around 30.2 prices in growth, but it is nowhere near the nosebleed 700+ peak from the last five years. Multiple compression has mostly already happened.
5. Street still sees upside a key Wall Street firm trimmed its NFLX price target to $115 from $120 but kept a Buy rating, with an average Street target near $115.93, and Netflix has already attracted a massive customer base and level of profitability, an advantage that makes a virtuous cycle more likely to continue.
BONUS on what the options chain is telling us:
Put OI clustering right at/below spot: 75 puts have 1,655 OI, 70 puts have 1,470, 65 puts have 970 heavy hedging/support-building right where the stock is trading. That's classic pre-earnings protective positioning, not necessarily directional bearishness.
Massive call wall at 80: 7,173 OI on the 80 calls dwarfs every other strike on the board (next closest is ~3,400 at the 85 calls). That's a magnet/resistance level a lot of capital is positioned for (or writing against) a move to $80.
ATM pricing is call-favored: at the 74 strike, calls are bid/ask 3.95/4.05 vs puts at 3.55/3.60 calls carry a slight premium over puts at the money, a mild bullish skew.
I'm interested in July 24 $75 calls for earnings.
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