Netflix stock analysis: bearish technicals, options point to big moves after earnings
Netflix stock has slumped into a bear market in the past few months, moving from a record high of $133 in June last year to $70.53 today. This retreat will be put to the test when the media giant publishes its financial results on Tuesday, with the options market pointing to renewed volatility. Netflix stock to be highly volatile after earnings NFLX stock has slumped in the past few months, mirroring the performance of other media companies, including Disney and Skydance. The options market suggests that the stock will be highly volatile after releasing its earnings report on Tuesday. Options expiring on Friday have an implied volatility of 92.3%, much higher than the historical volatility of 34%. Most of the put volume is concentrated at $77, much higher than where it is today. On the other hand, most of the puts are at $66. The company has a put/call ratio of less than 0.40, a sign that there are more calls than puts. Analysts have a mixed outlook about the NFLX stock ahead of its earnings report. BMO Capital Markets recently slashed its outlook from $135 to $125, while maintaining an outperform rating. Wedbush’s Alicia Reese also lowered the target from $105 to $90, while Jefferies has a target of $85. READ MORE: Netflix announces layoffs: another sign of distress? Netflix’s growth has slowed recently The most recent results showed that the company’s revenue has slowed in the past few months, which explains why it considered spending a fortune to buy Warner Bros. Discovery. Its second-quarter revenue grew by 13% to $12.6 billion, while management narrowed its annual guidance to between $51 billion and $51.4 billion. Analysts expect that its upcoming earnings report will show that its revenue rose by 11% to $12.8 billion, marking another deceleration. Its earnings-per-share is expected to come in at 82 cents, up from 59 cents in the same period last year. There are signs that Netflix lacks a clear catalyst. As such, it is focusing on rising prices and putting more focus on its advertising business. For it to reignite its growth, the management will need to launch new products on its platform. These trends explain why the company’s valuation is falling. The company has a forward price-to-earnings ratio of 19, much lower than the five-year average of 34. Netflix has bearish technicals NFLX stock chart | Source: TradingView The weekly chart shows that the NFLX stock has formed a series of lower lows and lower highs since June last year. It has now moved below the 50% Fibonacci Retracement level of $75. The stock has already dropped below the 50-week and 200-week Exponential Moving Averages (EMA). It has remained below the Supertrend indicator, while the MACD has remained below the zero line. Therefore, there is a risk that NFLX stock will have a bearish breakout, potentially to the 61.8% Fibonacci Retracement level of $61, which is about 14% below the current level. On the flip side, a move above the $77 will invalidate the bearish outlook. The post Netflix stock analysis: bearish technicals, options point to big moves after earnings appeared first on Invezz