Is Netflix ready to bounce back?

NOTetflix Inc will report fourth quarter results after U.S. markets close on Thursday. Whether the live-streaming pioneer added enough new subscribers in the last quarter to satisfy dwindling shoppers will be a priority.

The company’s stock price fell 25% from its highest level since November after the strong third-quarter earnings report. Thanks to Squid Game, the live streamer added 4.4 million new users in the third quarter, beating its own forecast of 3.5 million. Earnings per share were $3.18, well above the $2.56 estimate. Revenue was in line with expectations at $7.48 billion. The company expects to add 8.5 million new customers, with revenue growth of $7.7 billion in the fourth quarter, growing 16% year-over-year, which would be the slowest quarter in 4 year. Wall Street expects the company to earn 83 cents per share, down 30% from a year ago.

Under the conditions of increasing employment and filming costs, Netflix’s profit margin may be negatively affected. Disney+ and Amazon Prime all compete in the streaming industry. Netflix recently increased subscription prices in the United States and Canada to combat rising operating costs. But the result will not be shown in the fourth quarter earnings report. Don’t Look Up and Red Notice will hopefully increase new subscribers over the past three months.

Netflix shares have a relatively high price-to-earnings ratio at 46.51, above the average for technology stocks. But the company has ample cash flow and $15 billion in long-term debt, which will support further growth in the monetary tightening cycle. JP Morgan analyst Doug Anmuth cut the target price by $25 to $725 with a lower estimate from short-term subscribers.

As investors come to terms with the potential weakness in fourth quarter performance, the company’s stock price has held above $500 for the past 2 trading days. The tech-heavy Nasdaq fell just below the 200-day moving average, providing a chance for a near-term bottom. Netflix could catch the potential rebound in tech stocks with a dip buying opportunity.

Netflix – daily (a potential near-term bounce off key support at the 100.00% Ext Fib Retracement)

The daily chart indicates that the buying volume is accumulating in the short term. RSI and Stochastic fall into oversold territory. A downtrend reversal could be approaching with a potential rebound at the $500 level. However, the average downtrend is still intact, a short-term bounce might be short-lived. Key resistance price is projected at the 200-day moving average at $556.

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