Is Netflix (NFLX) a Smart Buy Prior to Earnings Announcement? Is Netflix (NFLX) a Smart Buy Prior to Earnings Announcement?

Written By Michael Gary Scott

Investors are always on the lookout for stocks that have the potential to outperform during earnings season, and Netflix, Inc. (NFLX) may just be one of those companies. With earnings on the horizon, the stage is set for a possibly positive report. Recent developments indicate that Netflix is experiencing favorable adjustments to their earnings estimates, a sign often linked to an earnings surprise. Analysts raising estimates just before earnings, armed with the latest information available, usually points towards underlying positive trends for NFLX in the upcoming report.

The Outlook for Netflix, Inc.

Current estimates place the Most Accurate Estimate for the upcoming quarter at $4.54 per share for NFLX, slightly higher than the broader Zacks Consensus Estimate of $4.50 per share. This uptick in estimates suggests a positive sentiment among analysts towards NFLX, giving the stock a Zacks Earnings ESP of +0.45% as it heads into earnings season.

Why Analyst Estimates Matter

An important factor to consider is the Zacks Earnings ESP, which has historically proven to be a significant indicator of positive surprises and market outperformance. Looking back over the past decade, stocks with a positive Earnings ESP, coupled with a Zacks Rank #3 (Hold) or better, have often resulted in positive surprises nearly 70% of the time. Furthermore, these stocks have delivered an average of over 28% in annual returns. Given NFLX’s current Zacks Rank of #3 and a positive ESP, investors may find it worthwhile to take a closer look at this stock before the earnings release.

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