Netflix will soon announce its earnings, with analysts predicting a 44.87% rise in earnings per share (EPS), going from $4.88 last year to $7.08. Revenue is also expected to grow by 15.7%, reaching around $11.06 billion, up from $9.56 billion last year. After the earnings report, the stock may move by about 6%. Key focus areas include advertising growth, subscriber engagement, and profit margins. Although price targets are high, ranging from $1.33k to $1.4k, even minor disappointments could affect the stock. The company’s price-to-earnings (P/E) ratios indicate strong earnings growth expectations, with a trailing P/E of 59.5× and a forward P/E of 46.8. Currently, Netflix shares are trading at $1269, which is a 42.4% increase this year. The stock saw significant gains in 2023 and 2024 but dropped by 51.05% in 2022. It hit a high of $1341.15 in June and a low of $821.10 in April. If it dips below its 50-day moving average of $1225.95, it could signal a decline. Other support levels to watch are $1176.28, $1141.24, $1100.26, and $1080.12. The 200-day moving average is $982.62, last near during an April correction. With the market bracing for a 6% movement after earnings, this is a critical time for derivative traders. The high expectations for profit and revenue growth suggest a possible major price swing, making options strategies that capitalize on volatility appealing. The company’s high valuation, with a trailing P/E near 60, offers little room for error. A slight miss in subscriber engagement or a cautious outlook on margins could lead to a sell-off. If results disappoint, the stock may revisit its 50-day moving average near $1226, in line with expected market movements. Conversely, a strong performance could push the stock towards its recent high of $1341.15. Reports from May 2024 indicated that its ad-supported plan has gained 40 million monthly active users, which supports the growth story. Positive commentary about this tier would greatly benefit call option holders. Given that the company added an impressive 9.33 million subscribers in Q1, expectations for this report are very high. Past strong performances have set the stage for elevated expectations. Any signs of slowing momentum could lead to significant backlash. For traders who expect a large move but are unsure of the direction, buying a straddle or strangle could be a good strategy, despite the high costs due to implied volatility. A more affordable option would be to use debit spreads, buying a call spread if bullish or a put spread if bearish. This approach limits both potential profit and risk. Looking beyond the immediate earnings report, we see strong underlying strength, indicating that buying on dips could be rewarding. Demand for the service remains steady, and its plan to broadcast two NFL games on Christmas Day 2024 is a notable new revenue opportunity. This long-term potential may provide a safety net for the stock, as investors are likely to step in during any significant downturn.

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