Netflix Gears Up for Q2 Earnings Release: ETFs in Focus
Netflix shares have risen about 29% over the past three months, outperforming the broader industry's growth of 25.1%. The strong trend is expected to continue, given that Netflix has a strong chance to beat earnings estimates.
As a result, ETFs with the largest allocation to this streaming giant, like First Trust Dow Jones Internet Index Fund FDN, FT Vest Dow Jones Internet & Target Income ETF FDND, MicroSectors FANG+ ETN FNGS, Communication Services Select Sector SPDR Fund XLC and Invesco Next Gen Media and Gaming ETF GGME are in focus.
Earnings Whispers
Netflix has an Earnings ESP of +1.68% and a Zacks Rank #2 (Buy). According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
The online video-streaming giant saw a negative earnings revision of a penny over the past seven days for the to-be-reported quarter. It is expected to report substantial earnings growth of 44.7% and revenue growth of 15.6% for the to-be-reported quarter. The company's earnings surprise history is impressive, as it delivered an earnings surprise of 6.94% on average over the past four quarters.
Analysts Are Bullish Ahead of Earnings
Analysts are bullish on Netflix, with an average brokerage recommendation (ABR) of 1.72 made by 45 brokerage firms. Out of them, 27 are Strong Buy and three are Buy. Strong Buy and Buy, respectively, account for 60% and 6.67% of all recommendations. The average price target for Netflix comes to $1,239.18, ranging from a low of $800 to a high of $1,600 (read: Tech ETFs Hit New Highs as NVIDIA Powers Market Rally).
Some analysts raised the target price on the stock ahead of the earnings release. BMO Capital lifted the target price to $1,425 from $1,200, reflecting growing confidence in the streaming giant's near and long-term growth prospects. BMO's upward revision was driven by record-breaking viewership for "Squid Game 3," along with favorable foreign exchange trends, which are expected to boost revenue and operating income for the second quarter of 2025 and the second half of the year. The analyst also highlighted emerging artificial intelligence tailwinds that could provide multi-year benefits.
Piper Sandler also recently raised its price target on Netflix to $1,400, citing upbeat management commentary and higher revenue expectations for the third quarter of 2025. Needham also boosted its target to $1,500, highlighting the company's exceptional labor efficiency, while Wells Fargo upped the price target on the stock to $1,500 from $1,222.
Pivotal Research Group lifted the price target to $1,600 from $1,350, citing Netflix's dominant position in the subscription streaming video market.
What to Watch
The company remains unscathed by the ongoing tariff chaos as the entertainment industry shows its resilience in tough economic times. Netflix's low-cost advertising-supported subscriptions and live sports expansion will continue to fuel growth.
The streaming giant offered an upbeat outlook for the ongoing quarter on its last earnings call. It expects revenues to grow 15% year over year to $11.04 billion, while earnings per share are expected to rise 44% to $7.03.
Valuations
Netflix shares look expensive at current levels, with a P/E ratio of 49.65 versus 15.63 for the industry. However, it has a strong Growth Score of B, indicating that it is primed for more growth. This justifies its high valuation. Also, Netflix has become a popular defensive play in the current unsteady market.
ETFs in Focus
First Trust Dow Jones Internet Index Fund (FDN)
First Trust Dow Jones Internet Index Fund follows the Dow Jones Internet Composite Index, giving investors exposure to the broad Internet industry. It holds about 40 stocks in its basket, with Netflix occupying the third spot at 10.1%. First Trust Dow Jones Internet Index Fund is the most popular and liquid ETF in the broad technology space, with AUM of $7.3 billion and an average daily volume of around 250,000 shares. FDN charges 49 bps in fees per year and has a Zacks ETF Rank #1 (Strong Buy) with a High risk outlook.
FT Vest Dow Jones Internet & Target Income ETF (FDND)
FT Vest Dow Jones Internet & Target Income ETF is an actively managed fund that invests primarily in U.S. exchange-traded equity securities intended to track the Dow Jones Internet Composite Index. It utilizes an "option strategy" consisting of writing (selling) U.S. exchange-traded call options on the Nasdaq-100 Index, or ETFs that track the Nasdaq-100 Index. It holds 41 stocks in its basket, with Netflix occupying the third position at 10.1% share. FT Vest Dow Jones Internet & Target Income ETF has accumulated $6.9 million in its asset base and trades in an average daily volume of about 3,000 shares. It charges 75 bps in annual fees.
MicroSectors FANG+ ETN (FNGS)
MicroSectors FANG+ ETN is linked to the performance of the NYSE FANG+ Index, which is an equal-dollar-weighted index. It is designed to provide exposure to a group of highly traded growth stocks of next-generation technology and tech-enabled companies. It holds 10 stocks in its basket in equal proportion, with Netflix's share coming in at 10%. MicroSectors FANG+ ETN has accumulated $479.3 million in its asset base and charges 58 bps in annual fees. It trades in a moderate volume of 109,000 shares a day on average and has a Zacks ETF Rank #3 (Hold) (read: Mag 7 ETFs Surge: Will the Rally Keep Rolling?).
Communication Services Select Sector SPDR Fund (XLC)
Communication Services Select Sector SPDR Fund offers exposure to companies from telecommunication services, media, entertainment and interactive media & services and has accumulated $23.5 billion in its asset base. It follows the Communication Services Select Sector Index and holds 23 stocks in its basket, with Netflix occupying the third position at 8.5% share. Communication Services Select Sector SPDR Fund charges 8 bps in annual fees and trades in an average daily volume of 6 million shares. It has a Zacks ETF Rank #2 (Buy).
Invesco Next Gen Media and Gaming ETF (GGME)
Invesco Next Gen Media and Gaming ETF offers exposure to companies with significant exposure to technologies or products that contribute to future media through direct revenues. It tracks the STOXX World AC NexGen Media Index, holding 93 stocks in its basket. Netflix is the fourth firm, accounting for 7.9% of the GGME assets. Invesco Next Gen Media and Gaming ETF has amassed $146.3 million in its asset base and charges 61 bps in annual fees. It trades in an average daily volume of 7,000 shares and has a Zacks ETF Rank #3.
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Netflix, Inc. (NFLX): Free Stock Analysis Report
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