Netflix is the S&P 500's best-performing stock of 2015, with a 142% gain so far.
Netflix surged all year even though analysts lowered expectations for its short-term and intermediate performance every time the company reported results.
It can be taken as a sign of the market's disconnect from reality. At various points in the year, investors have had reason to worry about Netflix's revenue, cash burn, and US subscriber additions, and still the shares have outperformed the rest of the S&P 500 by a wide margin.
And the analysts who cover this company have been lowering their expectations for earnings throughout the year, while they also boost their target price for the stock, according to Bloomberg data.
This disconnect could right itself as the broad decline in earnings per share creates broadly bearish sentiment that forces investors to ask harder questions of Netflix and the analysts.
According to Factset, more companies are lowering estimates for the final quarter of the year than the average over the past five years.
"Of the 110 companies that have issued EPS guidance for Q4, 84 have issued negative EPS guidance," according to an analyst note from the data provider.
That said, Factset also points out that analysts expect earnings growth to return next year. It sounds like a contradiction given the trend toward downward earnings revisions we've seen all year. If things end up looking bad once earnings season kicks off, the downward revisions trend may well continue into 2016.
There is a bullish reading of Netflix performance of course. If the company does end up dominating media all over the world over the next decade, then its spending — which bears have said is unsustainable — is vital and, and its long-term value is truly much greater than it is even today.
If Netflix creeps higher on bad news, think of what it will do when the news is good. That's one way to look at it.
25 Canada Square, Level 33, office 50, Canary Wharf London, E14 5LQ +44 20 3608 6256
World Financial Markets - 0700 17 600 Varchev Exchange - 0700 115 44
Varchev Finance Ltd is registered in the FCA (FINANCIAL CONDUCT AUTHORITY) with a passport in the United Kingdom: FCA, United Kingdom - registration number: 494 045, which allows provision of financial services in the United Kingdom.
Varchev Finance Ltd strictly comply with the statutes of the European directive MiFID (Markets in Financial Instruments). targeting increased efficiency, transparency and uniformity of financial instruments.
Varchev Finance Ltd is authorized and regulated by the Financial Supervision Commission - Sofia, Bulgaria: License number RG-03-02-05 / 15.03.2006
The information on this site is not intended for distribution or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 63,41% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.