What Lies in Store for Netflix ETF in Q1 Earnings?

Netflix NFLX is set to release first-quarter 2024 results on Apr 18 after market close. It is worth taking a look at the fundamentals of the world’s largest video-streaming company ahead of its results.

Netflix shares have risen about 26% over the past three months, outperforming the broader industry, which has gained 5.3% in the same time frame. The solid trading is expected to continue as Netflix has a reasonable chance to beat earnings estimates (read: 5 Beaten-Down Top-Ranked Stocks to Buy in S&P 500 ETF).

As a result, ETFs with the largest allocation to this streaming giant, like MicroSectors FANG+ ETN FNGS, Invesco Next Gen Media and Gaming ETF GGME, Pacer BioThreat Strategy ETF VIRS First Trust S-Network Streaming & Gaming ETF BNGE and First Trust Dow Jones Internet Index Fund FDN are in focus.

Earnings Whispers

Netflix has an Earnings ESP of +0.36% and a Zacks Rank #3 (Hold). According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The online video-streaming giant saw no earnings estimate revision over the past seven or 30 days for the to-be-reported quarter. Netflix is expected to record earnings growth of 55.9% and revenue growth of 13.4% for the to-be-reported quarter. The company’s earnings surprise history is impressive, as it delivered an earnings surprise of 5.43%, on average, over the past four quarters. Netflix belongs to a bottom-ranked Zacks industry (placed at the bottom 7% of 250+ industries).

Netflix currently has an average brokerage recommendation ABR of 1.96 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell etc.) made by 40 brokerage firms. The current ABR compares to an ABR of 1.96 a month ago based on 40 recommendations.

Of the 40 recommendations deriving the current ABR, 22 are Strong Buy and one is Buy. Strong Buy and Buy, respectively, account for 55% and 2.5% of all recommendations. A month ago, Strong Buy made up 55%, while Buy represented 2.5%.

Based on short-term price targets offered by 34 analysts, the average price target for Netflix is $609.56. The forecasts range from a low of $335.00 to a high of $765.00.

What to Watch?

Investors will closely watch if the streaming giant can maintain its impressive subscriber growth, capitalize on its ad-supported plans and continue to dominate the streaming landscape. On the last earnings call, Netflix anticipated slower subscriber growth in the first quarter compared to the fourth quarter of 2023, attributing the slowdown to seasonal trends, but it is expected to be up from the year-ago period.

Revenues are anticipated to grow 13.2% to $9.2 billion and earnings per share are expected to be $4.49 for the first quarter.

Netflix has been benefiting from a dual tailwind of paid sharing initiatives as well as strong underlying business demand from a robust, increasingly global content slate. A combination of rising subscriber numbers, strong pricing, higher ad revenues and cost cuts is expected to fuel a rise in Netflix’s earnings, per analysts.

ETFs in Focus

MicroSectors FANG+ ETN FNGS

MicroSectors FANG+ ETN is linked to the performance of the NYSE FANG+ Index, which is an equal-dollar-weighted index. It is designed to provide exposure to a group of highly traded growth stocks of next-generation technology and tech-enabled companies. It holds 10 stocks in its basket in equal proportion, with Netflix’s share coming in at 10% (read: 5 ETFs Leading the Tech Rebound: Will the Rally Continue?).

MicroSectors FANG+ ETN has accumulated $267 million in its asset base and charges 58 bps in annual fees. It trades in a moderate volume of 181,000 shares a day on average and has a Zacks ETF Rank #3 (Hold).

Invesco Next Gen Media and Gaming ETF GGME

Invesco Next Gen Media and Gaming ETF offers exposure to companies with significant exposure to technologies or products that contribute to future media through direct revenues. It tracks the STOXX World AC NexGen Media Index, holding 94 stocks in its basket. Netflix is the second firm, accounting for 8.4% of the GGME assets.

Invesco Next Gen Media and Gaming ETF has amassed $31.6 million in its asset base and charges 60 bps in annual fees. It has a Zacks ETF Rank #2 (read: 5 Top-Ranked ETFs at New Highs Set to Soar Further).

Pacer BioThreat Strategy ETF VIRS

Pacer BioThreat Strategy ETF seeks exposure to U.S. companies that provide their goods and services to the market by accomplishing one or more of the seven index themes. It tracks the LifeSci BioThreat Strategy Index, holding 55 stocks in its basket. Netflix occupies the second position with 5.8% of the assets.

Pacer BioThreat Strategy ETF has accumulated $3.5 million in its asset base and charges 70 bps in annual fees. It trades in a meager average daily volume of 100 shares and has a Zacks ETF Rank #3.

First Trust S-Network Streaming & Gaming ETF BNGE

First Trust S-Network Streaming & Gaming ETF tracks the S-Network Streaming & Gaming Index and holds 46 stocks in its basket. Netflix takes the fourth spot, accounting for 5.3% of the assets. From a sector look, entertainment takes the largest share at 44.6%, while hotels, restaurants & leisure, semiconductors & semiconductor equipment, and interactive media & services round off the next three spots with double-digit exposure each.

First Trust S-Network Streaming & Gaming ETF has accumulated $5 million in its asset base and trades in an average daily volume of under 1,000 shares. It charges 70 bps in annual fees.

First Trust Dow Jones Internet Index Fund FDN

First Trust Dow Jones Internet Index Fund follows the Dow Jones Internet Composite Index, giving investors exposure to the broad Internet industry. It holds about 41 stocks in its basket, with Netflix occupying the fourth spot at 5.3%.

First Trust Dow Jones Internet Index Fund is the most popular and liquid ETF in the broad technology space, with AUM of $6.3 billion and an average daily volume of around 439,000 shares. FDN charges 52 bps in fees per year and has a Zacks ETF Rank #2 with a High risk outlook.

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