Netflix Sinks On Q1 Subscriber Loss: ETFs In Focus

Netflix (NFLX) reported dismal first-quarter 2022 results after the closing bell on Tuesday, spreading huge pessimism on the company’s growth outlook. The world's largest video streaming company lost subscribers for the first time in a decade and guided for an even bigger subscriber loss for the current quarter. This has clouded Netflix’s earnings and revenue beat.

Shares of Netflix tumbled as much as 26% in after-hour trading and erased about $40 billion from its stock market value. As such, ETFs like MicroSectors FANG+ ETN (FNGS)Invesco Dynamic Media ETF (PBS)Vanguard Communication Services ETF (VOX)Simplify Volt Pop Culture Disruption ETF (VPOP) and Communication Services Select Sector SPDR Fund (XLC) , with the largest allocation to this streaming giant, have been in focus.

Q1 Earnings in Detail

The company reported earnings per share of $3.53, outpacing the Zacks Consensus Estimate of $2.92 and increasing from $3.75 in the year-ago quarter. Revenues rose 10% year over year to $7.87 billion and edged past the Zacks Consensus Estimate of $7.9 billion.

Netflix lost 200,000 subscribers globally in its first quarter, falling well short of its forecast of 2.5 million new subscribers. Subscriber growth, which thrived during the pandemic, has been hit hard by skyrocketing inflation, a war in Ukraine and fierce competition. Suspended service in Russia after the Ukraine invasion took a huge toll, resulting in the loss of 700,000 members. In the current quarter, Netflix expects to lose 2 million new streaming subscribers. This suggests that the streaming giant is entering a new phase of slower growth.

Some of the big TV hits during the quarter include “Bridgerton” and “Inventing Anna,” and big films include “Tinder Swindler” and “The Adam Project.” The steaming giant plans to create a host of animations, films and a theatre production on his titles, which span Fantastic Mr Fox, The Twits and The Witches.

Netflix expects revenues and earnings per share of $8 billion and $3.00, respectively, for the ongoing quarter. The Zacks Consensus Estimate is pegged at $7.94 billion for revenues and $2.92 for earnings per share.

ETFs in Focus

MicroSectors FANG+ ETN

MicroSectors FANG+ ETN is linked to the performance of the NYSE FANG+ Index, which is an equal-dollar-weighted index, 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 share coming in at 10%.

MicroSectors FANG+ ETN has accumulated $64.8 million in its asset base and charges 58 bps in annual fees. It trades in a paltry volume of 27,000 shares a day on average and has a Zacks ETF Rank #3 (Hold).

Invesco Dynamic Media ETF

Invesco Dynamic Media ETF provides exposure to companies engaged in the development, production, sale and distribution of goods or services used in the media industry by tracking the Dynamic Media Intellidex Index. It holds 31 stocks in the basket, with Netflix taking the fifth position, holding a 4.7% allocation.

Invesco Dynamic Media ETF has been able to manage $44 million in its asset base while sees a lower volume of about 6,000 shares a day. It has 0.63% in expense ratio and a Zacks ETF Rank #3 with a Medium risk outlook.

Vanguard Communication Services ETF

Vanguard Communication Services ETF also targets the telecommunication services stocks by tracking the MSCI US Investable Market Communication Services 25/50 Index. Holding 108 stocks in its basket, Netflix takes the eighth spot with a 4.2% share. Interactive media & services is the top sector, accounting for 43.9% of the portfolio, while movies & entertainment, cable & satellite, and integrated telecommunication services round off the next three.

Vanguard Communication Services ETF has AUM of $3.7 billion and trades in a good volume of 262,000 shares a day, on average. It charges 10 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook.

Simplify Volt Pop Culture Disruption ETF

Simplify Volt Pop Culture Disruption ETF is an actively managed fund, providing investors concentrated exposure to media platform leaders across streaming, social and Internet of Things. Netflix takes the eighth spot with a 4.3% allocation.

Simplify Volt Pop Culture Disruption ETF has amassed $1 million in its asset base and trades in a volume of 1000 shares per day on average. The product has an expense ratio of 0.95%.

Communication Services Select Sector SPDR Fund

Communication Services Select Sector SPDR Fund offers exposure to companies from telecommunication services, media, entertainment and interactive media & services, and has accumulated $11.3 billion in its asset base. It follows the Communication Services Select Sector Index and holds 26 stocks in its basket, with Netflix occupying the eighth position at 4.2%. About half of the portfolio is allocated to interactive media & services, while entertainment and media round off the next two (read: Top and Flop ETFs of Q1).

Communication Services Select Sector SPDR Fund charges 10 bps in annual fees and trades in an average daily volume of 6 million shares. It has a Zacks ETF Rank #3.

Disclosure: contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any ...

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