Buy Netflix Stock Now Ahead of Earnings at a Huge Discount?

This story originally appeared on Zacks

Netflix NFLX Stocks have fallen along with several growth names since November and the beginning of 2022. The big pullback is only part of the reason why streaming TV stock is worth buying ahead of the fiscal 2021 fourth-quarter financial release on Thursday, Jan. 20.

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Broadcasting is still a growth game

The broadcast TV pioneer was one of the early winners of the pandemic that eventually suffered user withdrawals. Netflix is ​​also facing increased competition from Disney DIS, Amazon, Apple, and nearly every other major media company as streaming attempts to bypass linear television.

Fortunately, the streaming wars are far from winning everything, with many consumers paying for multiple services due to their vastly different content libraries. Netflix also continues to release a variety of shows, movies, reality TV shows, and more in the United States and around the world.

Netflix has made deals with Hollywood giants in front of and behind the camera. These partnerships highlight the slow death of movie theaters, especially outside of blockbuster releases, which Disney properties have dominated in recent memory. Additionally, the TV broadcasting giant is entering the burgeoning mobile gaming space.

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Other essentials

Recently, NFLX topped third-quarter earnings and users expected to close the quarter with 9% more users at 213.6 million. Executives projected similar year-over-year user growth in the fourth quarter of 2021 to end the year with 222.1 million global users.

Netflix said last quarter that it continues to expect it will publish free cash flow around 2021, excluding variable production timing. It expects FCF to be positive on an annual basis in 2022 and beyond.

Management reiterated its belief that it no longer needed to raise external funding to fund day-to-day operations. NFLX repurchased some stock last quarter, but continues to prioritize funding for “new growth opportunities such as gaming, followed by selective acquisitions.”

Looking ahead, Zacks estimates that Netflix’s fiscal year 21 adjusted EPS is up 77% on 19% higher sales that will attract $29.70 billion. The company is then expected to follow up with a 24% higher profit in 2022 and 14% stronger revenue, to $33.95 billion. NFLX’s FY21 and Fiscal Year 22 EPS estimates have risen since its third-quarter release, although there’s been mixed review activity to help it earn Zacks’ No. 3 (suspension) rating at the moment.

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Netflix stock has risen 315% in the past five years to wipe out the tech sector by 160%, and was one of the best-performing stocks of the 2000s. After the initial post-pandemic rally, NFLX stock moved sideways for about a year until it started to recover in August. Then the stock hit a record high in mid-November. But the NFLX is down 23% since then to sit at summer 2020 levels again.

Netflix’s plunge pushed it below oversold levels (30 or less) at 23. The drop, along with an impressive EPS growth forecast, saw the NFLX trade at a decade low of 40.3X for 12-month earnings. Combined with the discounted rating, Netflix is ​​trading 25% below Zacks’ current consensus price target.

Wall Street also remains high in the NFLX, with 70% of brokerage recommendations set by Zacks on “strong buys.” Therefore, near-term investors and those with longer expectations may want to consider the Netflix stock right now.

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