The King of Streaming Is Down, But Not Out

Shares of Netflix (NFLX) took a dive in after-hours trading on Tuesday as the company reported earnings. While earnings were fine, subscriber growth slowed to 208 million. That’s up 14 percent from a year before, but it’s also a sign that the boost at the start of the pandemic is starting to wear off.

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  • Despite the selloff, shares of Netflix were a top media play in the past year, edging out other companies that have also gotten into the streaming space.

    The selloff, based on lower-than-expected subscribers, is nothing new. That metric has become the key for an earnings season win… or miss. With the latest numbers at a miss, the company still expects higher growth rates in the second half of the year.

    Meanwhile, the company has a backlog of shows and movies that were delayed during the pandemic.

    These longer-term trends point to a recovery in the share price. The post-earnings slump sent shares to the low $500 range, about midway between the 52-week high and low.

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  • Action to take: Shares could easily rally 20-25 percent in the next few months coming off the earnings numbers miss. For traders, the September $600 calls, last going for around $25, could deliver high-double digit returns on a rebound well before expiration.


    Disclosure: The author of this article has no positions in the stock mentioned here, but may make a trade on this company after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.