We recently compiled a list of the Jim Cramer is Talking About These 14 Stocks Before Earnings. In this article, we are going to take a look at where Netflix, Inc. (NASDAQ:NFLX) stands against the other stocks Jim Cramer is talking about before earnings.
As earnings season kicks off, Jim Cramer of Mad Money offered insights on what investors should watch in the coming week on Wall Street. He highlighted the anticipated reports from several major banks, along with a few other companies, as key events to monitor.
Cramer expressed optimism about the current market conditions, noting that the situation aligns with his previous predictions that the market would thrive once the Federal Reserve began reducing interest rates while the economy remained strong. He remarked on the spectacular earnings reported by some major banks on Friday, emphasizing that this positive news is particularly impactful now, as opposed to previous instances when the Fed was tightening, causing good news to go largely unnoticed. Cramer believes that with the Fed now supportive of the market, there is potential for more favorable times ahead.
Looking to Monday, Cramer predicted that the focus will shift away from earnings reports due to other significant developments over the weekend. He mentioned the anticipated unveiling of a Chinese stimulus package and noted that although the rally in China has stalled, it could regain momentum if the Chinese government injects substantial funds into real estate and the stock market.
“Now, on Monday, we won’t be focused on earnings. There’s a lot of other stuff happening over the weekend. For instance, I think we’ll be parsing the Chinese stimulus package that’s going to be unveiled. The China rally is stalled, but it can get rolling again if the Chinese Communist Party keeps throwing tens of billions of dollars for the stimulus at real estate, at the stock market.”
Cramer warned that the financial sector will face a significant test on Tuesday, as different banks will be reporting their earnings. Cramer reminded investors that we are just at the beginning of one of the year’s four reporting periods, which can be chaotic and open to various interpretations.
“We’re at the beginning of one of the year’s four reporting periods,” he said. “They’re jumbled. They’re open to a lot of interpretation. They’re fast. So listen to the calls, ponder a moment, and only then should you pull the trigger.”
Our Methodology
For this article, we compiled a list of 14 stocks that are slated to release earnings this week and were discussed by Cramer during his episode of Mad Money on October 11. We listed the stocks in ascending order of their hedge fund sentiment as of the second quarter, which was taken from Insider Monkey’s database of more than 900 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Netflix, Inc. (NASDAQ:NFLX)
Number of Hedge Fund Holders: 103
Cramer has been bullish on Netflix, Inc. (NASDAQ:NFLX) for some time. During Friday’s episode, he posited his opinion that the company will report good news.
“We get results from Netflix and the Street’s been all over the place on this one. I think it’ll be good, thanks to the new ad tier. And they’re about to release Squid Game 2. I’m told it’s going to be a guaranteed worldwide blockbuster, could bring in new subscribers from around the globe.”
Jim Cramer recently voiced his disagreement with Barclays’ pessimistic view that Netflix (NASDAQ:NFLX) would struggle to meet its revenue estimates. Cramer pointed out that the growth of the company’s advertising business, combined with new revenue streams from paid sharing plans, has provided the company with greater flexibility in achieving its revenue goals. He noted that starting next year, the streaming giant will no longer report quarterly subscriber figures, allowing a shift in focus solely to revenue expectations, which he believes is the crucial new metric.
Cramer also highlighted Piper Sandler’s position that even if Netflix (NASDAQ:NFLX) cannot maintain the same margin expansions as in the past year, it can still achieve steady growth. He expressed agreement with this perspective, suggesting that it shows a realistic approach to the company’s potential.
What truly matters, according to Cramer, is whether the company meets its financial targets. If the company continues to outperform earnings expectations, as it has done in 10 of the last 12 quarters, then concerns about its valuation become less relevant, as the stock price will appear more attractive in hindsight. Conversely, if it fails to deliver on its numbers, there would be little justification for a high stock price, which could lead to a decline.
Cramer believes the company deserves the benefit of the doubt, which is why he maintains a bullish stance on the stock. He remarked that the bear thesis seems overly speculative and not firmly grounded in current realities. It should be noted that this year, the company reached a significant milestone by exceeding 40 million members in its ad-supported tier. The company announced a 17% increase in revenue for the second quarter, along with a 17% growth in its paid streaming memberships from the prior year, which have now reached a total of 278 million.
Overall NFLX ranks 3rd on our list of the stocks Jim Cramer is talking about before earnings. While we acknowledge the potential of NFLX as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NFLX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Read Next: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.
