Netflix Stock Has a Big Week Ahead of Itself

If you're anything like me.Netflix (NASDAQ: NFLX)If you are an investor, then it is normal to be excited and nervous. You have every right to be excited. The stock has risen as much as 27% this year, outperforming the broader rock, and if you stretch the starting line back to the beginning of last year, the rise has translated into more than one.

You should be nervous, too, because the company will announce its first-quarter results shortly after the closing bell on Thursday. Expectations are high, and with big gains come big responsibilities. Netflix will need to release another strong financial update if it wants to build on the glorious results of the past 15 months.

Leaving the world behind.

The momentum is on the side of the bulls, as Netflix shares hit a new 52-week high this month, and have now hit new highs for six months in a row. But that's not a new all-time high for the premium digital multiplex pioneer, which is still 12% away from its all-time high set at the end of 2021. Since the stock tends to move sharply higher or lower after new financial data is released, if all goes well, it could reach its all-time high by the end of the week.

The problem with the frothy optimism is that Netflix offered up optimistic guidance back in January when it released its Q4 numbers.Netflix is targeting $9.24B in revenue for the first three months of the year.The 13.2% year-over-year growth would be its largest revenue increase in more than two years.

On the other side of the income statement, the picture is even more optimistic, as Netflix is starting to realize the fruits of scalability. The platform has now been able to start combating password sharing without affecting subscriber growth. By the end of 2023, Netflix will reach 260.3 million subscribers globally, an increase of 13%, the largest quarterly growth in nearly three years.

Good luck canceling Netflix. You'll find yourself on the outside looking in when your coworkers and friends talk about the shows and movies that are widely watched on the service. People haven't been deterred by Netflix's price hikes and password-sharing restrictions, which have boosted its profitability.

The company's earnings are expected to be $1,976 million, or $4.49 per carry. Operating margin is expected to be 26.2%, which would be the strongest performance since the first quarter of 2021.

Don't push your head.

Wall Street is scrambling to keep up with rising stock prices. This week alone, Macquarie and Guggenheim raised their target prices by $90 and $100, respectively. Analysts following the company seem to think this is going to be a strong report, and they're hoping to gain ground by increasing their bullishness ahead of the report.

The trend setter for the streaming services stock is still in danger of falling apart. A stock doesn't translate over a 15-month period, and if the company itself is in trouble, the stock price will fall. Top-line growth should be fine. The problem may be at the bottom line, where Netflix has invested in games, live content and sports-related programs this year. With subscribers paying less and Netflix investing in digital marketing programs, the push to expand cheaper ad-supported memberships could squeeze margins.

A bearish person could also say that as high as Gwen Netflix's current stock price is, it's not perfect. From time to time, it's misguided. In the past, it's also missed the mark where it overestimated its ability to increase monthly memberships.

But you still don't want to bet against Netflix. It's a dominant player in a growing market. In similar situations, investors tend to see Holliday-style happy endings. Thursday afternoon could not come soon enough for excited and nervous Netflix shareholders.

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Rick Munarriz has a position in Netflix.The Motley Fool has a position in Netflix and recommends Netflix.The Motley Fool has a disclosure policy.

Netflix Stock Has a Big Week was originally published by The Motley Fool.