Technology ETF investors will have to tune on Monday as Netflix (NasdaqGS: NFLX) is set to reveal second quarter earnings.
Investors with exposure to technology ETFs like AdvisorShares New Tech and Media ETF (NYSEArca: FNG), Invesco NASDAQ Internet ETF (NasdaqGM: PNQI) and First Trust Dow Jones Internet Index (NYSEArca: FDN) will have to closely watch the Netflix earnings report Monday. NFLX makes up 7.5% of FNG’s underlying portfolio, 8.7% of PNQI and 6.4% of FDN.
Some market observers are already warning of weakness in Netflix earnings on July 16, pointing to a potential miss in new subscriber numbers.
According to Deutsche Bank, the internet video streaming giant could miss Wall Street second-quarter subscriber expectations next week, CNBC reports.
“We see limited upside and even some downside to 2Q guidance/consensus,” Deutsche Bank analyst Bryan Kraft said. “We don’t see 2Q earnings as a positive catalyst for the stock; in fact, we see some near term downside risk.”
Netflix Predictions
The analysts predict Netflix second-quarter global net subscriber additions will fall 1 million below to 500,000 above the Wall Street consensus, and US net member additions will either match expectations or miss by up to 500,000 subscribers for the same quarter.
“The stock has doubled this year, and added another $50B of market capitalization over the past quarter. Without meaningful positive estimate revisions, or 3Q subscriber guidance coming in ahead of expectations, it seems unlikely that the stock will move higher next week,” Kraft added. “The stock might see a pull back in the short term (i.e. next week), but we see significant long term, multiyear value creation ahead.”
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Mark Tepper, president and CEO of Strategic Wealth Partners, also warned of the high valuations with Netflix now showing a trailing price-earnings ratio in the triple digits and gains of more than 100% year-to-date, questioning whether or not the media company is able to maintain its break-neck growth spurt, CNBC reports.
Furthermore, Tepper believed that competition may heat up, especially from Hulu, Disney or Amazon Prime as they develop more original content.
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