Netflix Stock (NFLX) Rises Ahead of Q3 Earnings – Can It Break $1250 Resistance?

Netflix stock price (NASDAQ:NFLX) closed up 3.27% to start the week ahead of earnings, due after market close today. The stock has shown considerable strength over the past year, delivering a return of approximately 62%, significantly outperforming the broader market and 90% of its peers in the S&P 100.

NFLX is 0.52% higher in this morning's premarket at $1244.98, with the question now moving to whether Netflix can break through the resistance it's been facing around the $1250 level and reach new highs?

Analysts project revenues of approximately $11.51 billion, a 17.17% increase year-over-year. Earnings per share (EPS) are expected to reach $6.97, compared to the $5.40 in the same quarter in 2024. This growth is largely attributed to strategic price adjustments implemented earlier this year and the burgeoning advertising revenue stream.

Netflix's aggressive investments in advertising and gaming are also under intense scrutiny. The launch of its in-house ad tech platform in April was a significant step toward enhancing advertising capabilities and revenue generation.

The move into gaming, with over 120 mobile titles now available, represents another attempt to diversify revenue streams and boost user engagement. However, the gaming venture has yielded less than a 0.5% increase in user engagement, raising concerns about its long-term profitability and strategic fit.

Despite the focus on new ventures, content remains the cornerstone of Netflix's success. A robust content slate, featuring popular titles like “KPop Demon Hunters” and the highly anticipated second season of “Wednesday,” is expected to drive significant subscriber growth and revenue. This strong content lineup is projected to contribute to Netflix's fastest revenue increase in over four years.

It's important to acknowledge the external factors that could influence Netflix's stock performance. The upcoming earnings report coincides with a period of heightened market volatility, driven by U.S.-China trade tensions and delayed economic data releases. The U.S. Consumer Price Index (CPI) report, due later this week, could also impact Federal Reserve policy decisions and market sentiment.

Analyst sentiment surrounding Netflix remains cautiously optimistic. Seaport Res Ptn recently raised its FY2025 EPS estimate for Netflix to $26.26, up from $26.10, reiterating a “Strong-Buy” rating.

While the prevailing sentiment surrounding Netflix is largely positive, the success of Netflix's advertising venture is far from guaranteed. While the in-house ad tech platform is a positive step, the company faces stiff competition from established players in the digital advertising space.

Ultimately, Netflix's long-term success hinges on its ability to consistently deliver compelling content that justifies its premium pricing.