Netflix: Binge-Watch the Breakout? Or Time to Switch Off?
Editor's note: Any and all references to time frames longer than one trading day are for purposes of market context only, and not recommendations of any holding time frame. Daily rebalancing ETFs are not meant to be held unmonitored for long periods. If you don't have the resources, time or inclination to constantly monitor and manage your positions, leveraged and inverse ETFs are not for you.
Investing in the funds involves a high degree of risk. Unlike traditional ETFs, or even other leveraged and/or inverse ETFs, these leveraged and/or inverse single-stock ETFs track the price of a single stock rather than an index, eliminating the benefits of diversification. Leveraged and inverse ETFs pursue daily leveraged investment objectives, which means they are riskier than alternatives which do not use leverage. They seek daily goals and should not be expected to track the underlying stock’s performance over periods longer than one day. They are not suitable for all investors and should be utilized only by investors who understand leverage risk and who actively manage their investments. The Funds will lose money if the underlying stock’s performance is flat, and it is possible that the Bull Fund will lose money even if the underlying stock’s performance increases, and the Bear Fund will lose money even if the underlying stock’s performance decreases, over a period longer than a single day. Investing in the Funds is not equivalent to investing directly in NFLX.
What’s On Deck for the Streaming Giant?
Netflix’s business model remains a cornerstone of the entertainment industry, evolving far beyond its DVD rental roots. Known for its global streaming platform, original content production, and growing ad-supported tier, Netflix has solidified its leadership in digital entertainment.
Its newly diversified revenue streams—subscriptions, advertising, and live events like sports—position Netflix for robust long-term growth in the expanding streaming and media markets, and ultimately, growth in their bottom line.
Netflix’s Q1 2025 earnings showcased stellar financial performance, with revenue hitting $10.1 billion, a 14.8% year-over-year increase, surpassing analyst forecasts of $9.9 billion. Earnings-per-share (EPS)* reached $5.28, beating estimates of $4.52.
Global paid memberships grew 14.2% to 282.7 million, driven by strong uptake in ad-supported plans, which now account for 40% of new sign-ups in markets where offered. The company’s operating margin expanded to 22%, up from 21% a year ago, reflecting disciplined cost management despite heavy content investments.
Traders that see the upside momentum in Netflix continuing may find an opportunity with Direxion’s Daily NFLX Bull 2X Shares (Ticker: NFXL), which seeks daily investment results, before fees and expenses, of 200% of the performance of Netflix, Inc. common stock (Ticker: NFLX).
Below is a daily chart of NFLX as of May 8, 2025.
Source: TradingView.com
Candlestick charts display the high and low (the stick) and the open and close price (the body) of a security for a specific period. If the body is filled, it means the close was lower than the open. If the body is empty, it means the close was higher than the open.
The performance data quoted represents past performance. Past performance does not guarantee future results.
Gauging Consumer Tolerance
Even with Netflix’s strong Q1 2025 results, concerns linger around external risks and other challenges. The company flagged potential margin pressures from rising content costs, with $17 billion earmarked for 2025 content spending, raising questions about profitability if subscriber growth slows. Additionally, Netflix noted uncertainties from President Trump’s April 2025 tariff announcements, which could increase costs for production equipment or impact international revenue. So far, the stock has not been shaken but such announcements.
Traders were pleasantly surprised by the latest Consumer Price Index (CPI)* inflation report on May 13, 2025. A lower-than-expected reading of 2.3% relieved expectations of cost pressures for Netflix. But regulatory scrutiny looms, with ongoing EU and U.S. investigations into Netflix’s market dominance and tax practices, which could lead to fines or operational restrictions, tempering the bullish outlook.
In this environment, Direxion’s Daily NFLX Bear 1X Shares (Ticker: NFXS), which seeks daily investment results, before fees and expenses, of 100% of the inverse performance in common shares of Netflix, Inc. (Ticker: NFLX) could make a comeback.
*Definitions and Index Descriptions
An investor should carefully consider a Fund’s investment objective, risks, charges, and expenses before investing. A Fund’s prospectus and summary prospectus contain this and other information about the Direxion Shares. To obtain a Fund’s prospectus and summary prospectus call 866-476-7523 or visit our website at direxion.com. A Fund’s prospectus and summary prospectus should be read carefully before investing.
The Funds have derived all disclosures contained in this document regarding Netflix, Inc. from publicly available documents. In connection with the offering of each Fund’s securities, neither the Funds, the Trust, nor the Adviser or any of its respective affiliates has participated in the preparation of such documents. Neither the Funds, the Trust nor the Adviser or any of its respective affiliates makes any representation that such publicly available documents or any other publicly available information regarding Netflix, Inc. is accurate or complete. Furthermore, the Funds cannot give any assurance that all events occurring prior to the date hereof (including events that would affect the accuracy or completeness of the publicly available documents described above) that would affect the trading price of Netflix, Inc. have been publicly disclosed. Subsequent disclosure of any such events or the disclosure of or failure to disclose material future events concerning Netflix, Inc. could affect the value of a Fund’s investments with respect to Netflix, Inc. and therefore the value of the Funds.
Direxion Shares Risks – An investment in a Fund involves risk, including the possible loss of principal. Each Fund is non-diversified and includes risks associated with a Fund concentrating its investments in a particular security, industry, sector, or geographic region which can result in increased volatility. A Fund’s investments in derivatives such as futures contracts and swaps may pose risks in addition to, and greater than, those associated with directly investing in securities or other investments, including imperfect correlations with underlying investments or the Fund’s other portfolio holdings, higher price volatility and lack of availability. As a result, the value of an investment in a Fund may change quickly and without warning.
Leverage Risk – The Bull Fund obtains investment exposure in excess of its net assets by utilizing leverage and may lose more money in market conditions that are adverse to its investment objective than a fund that does not utilize leverage. A total loss may occur in a single day. Leverage will also have the effect of magnifying any differences in the Fund’s correlation with NFLX and may increase the volatility of the Bull Fund.
Daily Correlation Risk – A number of factors may affect the Bull Fund’s ability to achieve a high degree of correlation with NFLX and therefore achieve its daily leveraged investment objective. The Bull Fund’s exposure to NFLX is impacted by NFLX’s movement. Because of this, it is unlikely that the Bull Fund will be perfectly exposed to NFLX at the end of each day. The possibility of the Bull Fund being materially over- or under-exposed to NFLX increases on days when NFLX is volatile near the close of the trading day.
Daily Inverse Correlation Risk – A number of factors may affect the Bear Fund’s ability to achieve a high degree of inverse correlation with NFLX and therefore achieve its daily inverse investment objective. The Bear Fund’s exposure to NFLX is impacted by NFLX’s movement. Because of this, it is unlikely that the Bear Fund will be perfectly exposed to NFLX at the end of each day. The possibility of the Bear Fund being materially over- or under-exposed to NFLX increases on days when NFLX is volatile near the close of the trading day.
Netflix, Inc. Investing Risk – Netflix, Inc. faces risks related to maintaining and expanding membership for its streaming services; competition in the entertainment video market; unforeseen costs or liability in connection with content that is acquired, produced, licensed and/or distributed through its service, among other risks.
Entertainment Industry Risk — Companies in the entertainment industry may be impacted by the high costs of research and development of new content and services in an effort to stay relevant in a highly competitive industry, and entertainment products may face a risk of rapid obsolescence.
Communication Services Sector Risk — The communication services sector may be dominated by a small number of companies which may lead to additional volatility in the sector. Communication services companies are particularly vulnerable to the potential obsolescence of products and services due to technological advances and the innovation of competitors.
Additional risks of each Fund include Effects of Compounding and Market Volatility Risk, Derivatives Risk, Counterparty Risk, Rebalancing Risk, Intra-Day Investment Risk, Industry Concentration Risk, Market Risk, Indirect Investment Risk, and Cash Transaction Risk. Additionally, for the Direxion Daily NFLX Bear 1X Shares, Shorting or Inverse Risk. Please see the summary and full prospectuses for a more complete description of these and other risks of a Fund.