Netflix At Critical Technical Level As Q3 Earnings Coming Up Offering Opportunity To Investors

Netflix NFLX is down 22% from its highs of 485 after the latest earnings report. The stock has been continuously punished due to the current market environment and the Writers' Strike. The recent comments by the CFO about the company not being near peak margins did not help the stock. However, the stock received a significant boost when the company announced its intention to raise prices after the Actor Strike ends. This presents an intriguing opportunity for investors if the stock can hold this critical level on the Daily & Weekly Chart.

The price increase is expected to boost Average Revenue per Member (ARM), either by driving more subscribers to the higher ARM ad-tier relative to the ad-free Standard plan or by increasing ad-free ARM. Either way, NFLX should be able to report higher revenue, which is particularly important after disappointing investors with the stock down 21% compared to NASDAQ's -9% since reporting 2Q earnings on 7/19.

The streaming giant has also modified its pricing tiers, discontinuing its basic ad-free tier in the U.S. and expanding the price gap between its standard ad-free plan and its ad-supported tier.

On the positive side, JPMorgan continues to believe that paid sharing will prove highly accretive to NFLX revenue over time, while advertising will also contribute more significantly in the fourth quarter and into 2024. Moreover, advertising is becoming a bigger and more durable revenue stream than paid sharing over time, and the streaming giant's ability to maintain pricing power has analysts encouraged about the future of the stock.

Technical Perspective

The 370-level on the stock provides a great risk-reward opportunity to investors if it can hold the bid. This level was previously a significant breakout level that is now acting as support. If the stock intends to rally into the earnings report scheduled for October 18, this level offers a favorable risk level for long positions. On the contrary, if this level breaks down, investors should consider waiting or managing positions to reduce risk ahead of earnings.