Can Netflix’s Earnings Align with Fundamentals and Technicals?

As anticipation builds for Netflix’s upcoming July 17 earnings report, investors are closely watching the streaming giant’s stock, which is currently hovering near all-time highs. At the heart of the debate is whether Netflix’s financial fundamentals can sustain its impressive technical momentum.

A significant shift in Netflix’s strategic focus from subscriber-centric metrics to revenue and margin growth has reshaped the company’s narrative. The latest financial report reveals that Netflix saw a remarkable 12.5% increase in revenue to $10.54 billion in the first quarter of 2025. This surge was largely driven by price adjustments in key markets such as the U.S. and the U.K. as well as the expansion of its ad-supported tier. Notably, Netflix now boasts over 40 million subscribers on its ad-supported plan, accounting for 40% of new sign-ups in eligible markets. This strategic move has allowed Netflix to diversify its revenue streams, with ad revenue expected to double to $1 billion by the end of the year.

Key fundamental strengths driving Netflix’s growth include a rise in operating margins to 31.7%, with projected guidance for 33% in the second quarter. This increase has been fueled by the company’s pricing power and cost management strategies. Additionally, Netflix continues to dominate the content landscape with popular hits like Squid Game and Cobra Kai, driving strong customer retention rates. The company’s internal targets suggest ambitious revenue goals of $80 billion and 410 million subscribers by 2030, leveraging its extensive global content libraries and anticipated growth in ad revenue.

However, there are lingering risks that investors should be mindful of. While revenue growth in the U.S. has slowed to just 2% sequentially, concerns have been raised over insider selling by executives amounting to $518 million since late 2024. Competitors like YouTube and TikTok also pose potential threats to Netflix, though the company’s early market entry and vast content catalog remain competitive advantages.

From a technical standpoint, Netflix’s stock price has surged to $1,339, nearing its 52-week high of $1,341.15, supported by robust financial fundamentals and positive investor sentiment. Despite the positive momentum, technical indicators suggest that the stock may be entering a precarious phase. The 14-day Relative Strength Index (RSI) currently stands at 71.6, well within “overbought” territory, indicating a possible pullback. The stock also faces resistance levels, with the $1,341.15 mark being a critical hurdle. A breakout above this level could propel the stock towards $1,600, while a failure could lead to a retreat to the $1,200 support level.

Analysts are divided in their outlook for Netflix. Bulls highlight the company’s strong position in the global streaming market, boasting over 301.6 million subscribers and the potential to achieve a $1 trillion market cap. Conversely, bears point to a forward price-to-earnings (P/E) ratio of 59x, significantly higher than the sector average, indicating the risk of a valuation correction if growth slows.

As investors await Netflix’s earnings report, they are advised to cautiously evaluate the convergence of the company’s financial fundamentals and technical indicators. Key factors to monitor include the company’s earnings performance, ad revenue growth, and technical breakouts. A beat in earnings and positive ad revenue metrics could drive the stock higher, while disappointing results could lead to a downward trend.

In conclusion, while Netflix’s growth story remains compelling, investors should exercise caution given the stock’s current valuation. A strategic approach that balances investment decisions with risk management is recommended, whether it involves entering a modest position ahead of earnings with tight stops or waiting for a potential pullback before considering investment. The upcoming earnings report will undoubtedly be a pivotal moment for Netflix and its investors, shedding light on the company’s future trajectory amidst changing market dynamics.