Veteran trader turns heads with Netflix earnings review | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

Back in the Seventies, the question was, “Is it live, or is it Memorex?”

This was the tagline of an ad campaign featuring Ella Fitzgerald, where Memorex said their cassette recordings of the legendary singer’s voice were so clear that they could shatter a glass – just as her live singing could.

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Today, TV viewers may want to know is it real or is it artificial intelligence, given that Netflix (NFLX) used generative AI in one of its TV shows for the first time.

“We remain convinced that AI represents an incredible opportunity to help creators make films and series better, not just cheaper,” Ted Sarandos, Netflix’s co-chief executive told analysts. “There are AI-powered creator tools. So, this is real people doing real work with better tools.”

AI was used to create a scene of a building collapsing in the Argentine science fiction show, The Eternaut.

“So the creators were thrilled with the result,” he said during the company’s second-quarter earnings call. “We were thrilled with the result. And more importantly, the audience was thrilled with the result.”

Greg Peters, Netflix co-CEO,

Bloomberg/Getty Images

Analyst cites Netflix’s world class brand

Netflix, home to such popular shows as Squid Games, Stranger Things and Ozark, beat Wall Street’s earnings expectations for the quarter, and boosted its full-year revenue forecast to a range of $44.8 billion and $45.2 billion, up from an earlier call for $43.5 billion to $44.5 billion.

This was the second quarter that Netflix did not release quarterly updates on subscription data.

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“Our higher forecast primarily reflects the weakening of the US dollar vs. most other currencies, plus healthy member growth and ad sales,” Netflix said in a letter to shareholders.

The company rolled out its proprietary Netflix Ads Suite in April, and co-CEO Greg Peters said, “We see good performance metrics across all countries, and the early results are in line with our expectations.”

“The most immediate benefit from this rollout is just making it easier for advertisers to buy on Netflix, Inc.,” he said. “We hear that benefit, that ease, from direct feedback talking to advertisers. They tell us that it is easier.”

Several investment firms issued research reports following the earnings release, including Bank of America Securities, which reiterating its buy rating and its $1,490 price target.

“In our view, Netflix shares will be fueled by continued positive subscriber and earnings momentum in addition to evolving advertising and live opportunities,” BofA said.

“Supported by its world-class brand, leading global subscriber scale, position as an innovator and increased visibility in growth drivers, we believe that Netflix will continue to outperform,” the firm added.

Wedbush analysts raised their price target on Netflix shares to $1,500 from $1,400 and reiterated their outperform rating, saying the company “continues to produce phenomenal results with ever more growth in its sights.”

Veteran trader says investors should be own alert

“Even as investor expectations were high heading into the print, and shares reflected some disappointment in the size of the beat and raise, the quality of the beat and raise keeps us positive as we assess the ongoing expansion of Netflix’s free cash flow,” the firm said.

Netflix shares are up 36% this year and the stock has surged 88% from this time in 2024. However, shares were falling on July 18, and The StreetPro’s Stephen Guilfoyle wanted to know what was going on.

“It is apparent that the markets are not impressed in these Netflix earnings nor in the guidance,” the veteran trader said in his recent column.

Looking over Netflix’s price chart, Guilfoyle, whose career dates back to the floor of the New York Stock Exchange in the 1980s, said that shares broke out from a double-bottom reversal this spring and into a June 30 high.

“I think investors should be on the alert at this point, even if the stock rallied from here, that the shares have already created two thirds of a head-and-shoulders pattern of bearish reversal,” he said. “This is not a healthy-looking chart.”

The daily moving average convergence divergence, which helps traders spot potential buy and sell signals, is now pretty bearish looking as well, he said.

In addition, the stock is now trading below its 50-day simple moving average, which calculates the average price during a specified period of time, smoothing out price fluctuations to reveal overall trends.

“There is a very good chance that if it does not look like the shares can retake that line before going into the weekend on Friday night that portfolio managers will be forced to reduce long side exposure by their respective risk managers,” Guilfoyle said.

“This, in my opinion, is not a dip to be bought, unless that line is retaken and held,” he added.