Netflix ETFs to Buy on Robust Q3 Earnings

Netflix NFLX reported robust third-quarter 2024 results after the closing bell on Thursday. The world's largest video-streaming company outpaced earnings and revenue estimates and offered an upbeat guidance. Shares of Netflix jumped as much as 5.4% in after-market hours.

Investors could tap the opportune moment through ETFs with the largest allocation to this streaming giant. These funds include MicroSectors FANG+ ETN FNGS, Invesco Next Gen Media and Gaming ETF GGME, First Trust Dow Jones Internet Index Fund FDN, Communication Services Select Sector SPDR Fund XLC and First Trust S-Network Streaming & Gaming ETF BNGE.

Q3 Earnings in Detail

The company reported earnings per share of $5.40, which outpaced the Zacks Consensus Estimate of $5.09 and improved 45% from the year-ago quarter. Revenues rose 15% year over year to $9.82 billion and were above the consensus estimate of $9.77 billion. 

The streaming giant added 5.1 million subscribers in the third quarter, marking a 14% increase from the year-ago quarter and taking the global membership to 282.7 million subscribers. Subscriber growth was driven by the popularity of series like “The Perfect Couple," "Nobody Wants This," and "Tokyo Swindlers," along with returning favorites like "Emily in Paris" and "Cobra Kai." Hit movies such as "Beverly Hills Cop: Axel F" and "Rebel Ridge" also drew subscribers during the quarter.

Netflix projects continued subscriber growth in the fourth quarter, given the release of the second season of the hit show “Squid Game,” live sports events such as a boxing match between Jake Paul and Mike Tyson, as well as two National Football League games on Christmas Day. Further, the company is also set to become the official broadcaster of TKO Group's (TKO) WWE professional wrestling events starting next year as Netflix expands its sports offerings (read: 5 Stocks Fueling Nasdaq ETF's Best Week in 2024).

The streaming giant expects revenues to grow 15% year over year. Netflix expects higher subscriber additions in the fourth quarter compared to last year due to a strong content slate. For the full year, revenues are expected to grow at the higher end of the previous 14-15% year-over-year growth guidance.

ETFs in Focus

MicroSectors FANG+ ETN (FNGS)

MicroSectors FANG+ ETN is linked to the performance of the NYSE FANG+ Index, which is an equal-dollar-weighted index. It is designed to provide exposure to a group of highly traded growth stocks of next-generation technology and tech-enabled companies. It holds 10 stocks in its basket in equal proportion, with Netflix’s share at 10%. 

MicroSectors FANG+ ETN has accumulated $378.2 million in its asset base and charges 58 bps in annual fees. It trades in a moderate volume of 141,000 shares a day on average and has a Zacks ETF Rank #3 (Hold).

Invesco Next Gen Media and Gaming ETF (GGME) 

Invesco Next Gen Media and Gaming ETF offers exposure to companies with significant exposure to technologies or products that contribute to future media through direct revenues. It tracks the STOXX World AC NexGen Media Index, holding 88 stocks in its basket. Netflix is the fourth firm, accounting for 7.9% of the GGME assets.

Invesco Next Gen Media and Gaming ETF has amassed $41 million in its asset base and charges 60 bps in annual fees. It has a Zacks ETF Rank #3.

First Trust Dow Jones Internet Index Fund (FDN)

First Trust Dow Jones Internet Index Fund follows the Dow Jones Internet Composite Index, giving investors exposure to the broad Internet industry. It holds about 41 stocks in its basket, with Netflix occupying the third spot at 7.7%. 

First Trust Dow Jones Internet Index Fund is the most popular and liquid ETF in the broad technology space, with AUM of $6 billion and an average daily volume of around 228,000 shares. FDN charges 51 bps in fees per year and has a Zacks ETF Rank #1 (Strong Buy) with a High risk outlook. 

Communication Services Select Sector SPDR Fund (XLC) 

Communication Services Select Sector SPDR Fund offers exposure to companies from telecommunication services, media, entertainment and interactive media & services and has accumulated $18.4 billion in its asset base. It follows the Communication Services Select Sector Index and holds 22 stocks in its basket, with Netflix occupying the fourth position at 5.9% share. About 41.5% of the portfolio is allocated to interactive media & services, while entertainment and media round off the next two (read: Verizon to Acquire Frontier Communications: ETFs in Focus). 

Communication Services Select Sector SPDR Fund charges 9 bps in annual fees and trades in an average daily volume of 3.5 million shares. It has a Zacks ETF Rank #2 (Buy).

First Trust S-Network Streaming & Gaming ETF (BNGE)

First Trust S-Network Streaming & Gaming ETF tracks the S-Network Streaming & Gaming Index and holds 45 stocks in its basket. Netflix takes the third spot, accounting for 4.9% of the assets. From a sector look, entertainment takes the largest share at 45.5%, while hotels, restaurants & leisure, interactive media & services, and semiconductors & semiconductor equipment round off the next three spots with double-digit exposure each.

First Trust S-Network Streaming & Gaming ETF has accumulated $3.8 million in its asset base and trades in an average daily volume of about 3,000 shares. It charges 70 bps in annual fees.

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Netflix, Inc. (NFLX): Free Stock Analysis Report
 
First Trust Dow Jones Internet ETF (FDN): ETF Research Reports
 
Communication Services Select Sector SPDR ETF (XLC): ETF Research Reports
 
MicroSectors FANG+ ETN (FNGS): ETF Research Reports
 
First Trust S-Network Streaming & Gaming ETF (BNGE): ETF Research Reports
 
Invesco Next Gen Media and Gaming ETF (GGME): ETF Research Reports

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