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Is Netflix ready to bounce?


Netflix Inc will report fourth quarter earnings after the US markets closing bell on Thursday. Whether the live streaming pioneer has added enough new subscribers in the last quarter to satisfy dip-buyers will be a focus.

The company’s share price tumbled 25% from the all-time high since November after its strong third quarter’s earnings report. Thanks to the Squid Game, the live streamer added 4.4 million new users in Q3, beating its own forecast of 3.5 million. Earnings per share were $3.18, well above estimate at $2.56. The revenue was in line with expectations at $7.48 billion. The company is projecting 8.5 million new customers added, with $7.7 billion in revenue growth in the fourth quarter, a 16% growth YoY, which would be the slowest quarter in 4 years. Wall Street expects the company to profit 83 cents per share, a 30% decline from a year ago.

In the conditions of rising costs on employment and filming, Netflix’s profit margin might be negatively affected. Disney + and Amazon Prime are all competing in the streaming industry. Netflix has increased the subscription prices in the US and Canada recently to combat the rising cost in operation. But the result will not be shown in the fourth quarter earnings report. Don’t Look Up and Red Notice are hopefully going to boost the number of new subscribers in the past three month.

Netflix’s shares have a relatively high level of Price to Earnings ratio at 46. 51, higher than the average in the tech shares. But the company has enough cash flows and a long-term debt of $15 billion, which will support further growth in the tightening monetary cycle. JP Morgan’s analyst Doug Anmuth cut the target price by $25 to $725 with a lower near-term subscriber estimate.

While investors are embracing the potential weak fourth-quarter performance, the company’s share price is lingering above $500 for the past 2 trading days. The tech-heavy Nasdaq, has fallen just below the 200-day moving average, which gives a chance for a near-term bottom off. Netflix might catch the potential bounce in the tech shares with dip-buying opportunity.

Netflix – daily (a potential near-term rebounding at the key support at the Fib. Ext retracement of 100.00%)

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

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