Netflix stock is on the cusp of a strong surge: here’s why

The Netflix stock price has done well in the past few weeks as investors cheered the pursuit of the highly overvalued Warner Bros. Discovery. NFLX shares jumped to $100, up by over 34% from its lowest level this year. It will now be in the spotlight as traders wait for the upcoming earnings.

Netflix stock has done well after ending Warner Bros pursuit 

The main reason why the NFLX stock has jumped in the past few weeks is that the management decided to end its pursuit of Warner Bros. Warner settled on Paramount Skydance, which agreed to pay over $100 billion, much higher than what Netflix had proposed.

To a large extent, Netflix’s decision to stop the pursuit was a good one considering that Paramount overpaid for Warner, which made over $37 billion in revenue last year and made a profit of just $727 million. 

Netflix would have added billions of dollars of debt in its balance sheet. It would have also pushed it to add more outstanding shares, diluting its shareholders.

Therefore, Netflix will maintain its business model, which is a relatively simple one. Netflix creates shows and makes money through subscriptions. Adding Warner’s assets would have made it a more complicated business.

Netflix to publish its earnings this month 

The next important catalyst for the Netflix stock is the upcoming financial results, which will come out on April 16.

Analysts expect the upcoming results to show that its revenue jumped by 15% in the first quarter to over $12.17 billion. They expect that its annual revenue will grow by 13% this year to over $51 billion followed by $57.17 billion next year.

The average estimate is that its earnings per share (EPS) jumped to 76 cents in the first quarter from 68 cents in the same period last year. 

The most recent results showed that its business continued doing well in the fourth quarter, with the trend set to continue after the company increased prices in the US. Its ad-supported package starts at $8.99 a month, while the standard package rose to $18.99. Its premium package now costs $24.99. The three packages were going for $7.99, $17.99, and $24.99 before the increase.

Netflix made over $10 billion in the fourth quarter to $12 billion in Q4 from $10.2 billion in the same period a year earlier. Its guidance is that its revenue will jump to $12.1 billion this quarter.

Its net income also rose to $2.41 billion from $1.86 billion in the fourth quarter of 2024. Also, the company continued to reduce the number of outstanding shares to 4.317 million from 4.378 million.

NFLX stock price technical analysis 

Netftlix stock chart | Source: TradingView

The daily timeframe chart shows that the NFLX stock has rebounded from the year-to-date low of $74.98 in February to the current $100.50 today. It formed an up-gap on February 27 after the company ended its pursuit of Warner Bros.

The stock has now moved comfortably above the 50-day and 100-day Exponential Moving Averages (EMA). It has also risen above the important resistance level at $100, invalidating the double-top pattern that was forming. A double-top is one of the most common bearish reversal signs in technical analysis.

Therefore, the stock will likely continue rising as traders wait for the upcoming earnings. If this happens, the stock may jump to last year's high of $133, which is about 32% above the current level.