(This is The Best Stocks in the Market , brought to you by Josh Brown and Sean Russo of Ritholtz Wealth Management.) Josh — We’re revisiting Netflix (NFLX) today as the stock nears an inflection point. We wrote this name up for you guys 87 days ago and the stock has basically gone nowhere so far. After an incredible first six months of the year, Netflix spent the summer chilling out on the couch. In my opinion, there’s a good chance that the consolidation below highs we’ve been watching play out is about to come to an end. The upcoming earnings report should be the catalyst. Full disclosure, I own the stock personally and have for a long time. What drives Netflix’s share price? Positive perceptions about new subscriber additions around the world, increased profitability coming from both premium and ad-supported tier customers and zeitgeisty content that keeps the platform front of mind in terms of pop culture and “the conversation.” In my opinion, we’ll see a growing realization on The Street that, at this moment in time, Netflix has all of those things happening for it all at once. Do you know what a KPop Demon Hunter is? Good, nobody knows. But that’s fine, because the animated film “KPop Demon Hunters” Netflix released this summer became its biggest hit ever. Ever ever. Over its initial 91-day tracking period (91-day tracking periods are a standard window Netflix reports on for its releases), KPop Demon Hunters recorded 325.1 million views on Netflix, making it the most-viewed title ever on the service across films and series. It overtook Red Notice , the previous Netflix record-holder, and consistently ranked in the top two of Netflix’s global movie charts for several weeks following its June 2025 release. The film’s momentum actually accelerated later in its run and this is not something that normally happens. Typically, a release bursts out of the gates and then fizzles. KPop is still spreading across the globe like wildfire three months into its run. Its fifth week alone brought in 25.8 million views, a feat Netflix says no original film had ever achieved before. Beyond streaming, its soundtrack became a global music event: seven songs reached Spotify’s daily U.S. Top 25, while four charted simultaneously in the Billboard Hot 100 Top 10, the first time a fictional or virtual group had done so. Its lead single “Golden” hit #1 on both the Billboard Global 200 and the Hot 100 , cementing its crossover dominance. The phenomenon even expanded into theaters, as the “sing-along” version opened in more than 1,700 locations and grossed $19.2 million in a single weekend—making it Netflix’s first film ever to top the U.S. box office. KPop is just one of several major pop cultural events that should drive upside to the KPIs they’ll report for the quarter. Netflix will release its Q3 earnings after the bell on Tuesday, October 21st. They’ve given guidance of around $6.87 in EPS. The Bloomberg consensus is $6.70 per share on $11.3 billion in revenue. If they can do the number (or exceed), you’re talking about 24% year over year profit growth and 15% top line. Bank of America’s got the highest target on The Street at the moment – $1490, which would be 20% higher from today’s level. Sean’s going to go deeper into some of the fundamental drivers and I’ll be back with the risk management. Best Stock Spotlight: Netflix, Inc. (NFLX) On the list since: 1/22/2025 One-year price chart: Sean – Netflix is the 7th best performer YTD within the S & P 500, up 36%. However, the last three months paint a different picture: While everyone else has enjoyed a bull market in AI spending and stock prices, NFLX underperformed its sector by about 14% the past few months. Analysts have pointed to a few bearish headwinds. Deteriorating margins towards the back half of the year due to higher marketing spend and large budget franchises, and a changing streaming environment with Disney in a deal-making frenzy. “People who eat crayons” as Josh would put it, point out the rich valuation with a trailing 51x PE and a 37x forward PE. Take into account its forward guidance and ad revenue opportunity and the valuation is justified. Last quarter full year guidance was raised from prior guidance, operating margins were up to 30% from 29%, and ad revenue is expected to double year-over-year. That 1% increase in margin is coming from both stronger revenue and a wider margin on that increased revenue via the advertising business, which is flowing right to its operating earnings. (Data via Quartr) Q3 revenue is expected to show 17% year-over-year growth with EPS growth of 29%. The last quarter of 2025 is anticipated to be a big one with a number of big releases. The latest true crime iteration of Monster is out already, the next Knives Out will drop in December, and the final season of Stranger Things will be released in two parts, to name a few. The company continues to justify its premium multiple through tangible revenue and profitability growth, not just streaming war narratives. Advertising is becoming a real profit center, not an experiment, and the ad-supported tier’s margin profile is already accretive to the broader business. As Netflix heads into Q4 with one of its most anticipated theatrical and streaming slates yet, the setup here looks compelling. Risk management Josh — One of the most annoying things that can happen with buying individual stocks on technical set-ups is an earnings report that wrecks a perfectly good chart. Nothing we can do about that, it’s a fact of life. Earnings reports for Netflix, in particular, have produced some pretty epic upside explosions and downside catastrophes. I tell you this now so that you understand the stakes of being long for a trade two weeks before a report. In the chart below, I take a one year price chart and strip out the 50-day so you can focus on the big picture. This April, Netflix bounced perfectly off its rising 200-day moving average as you can see below. That’s the textbook definition of a powerful uptrend — the buyers came in and soaked up all the panic-sellers at exactly the level they needed to: Let’s not overcomplicate things — We’re still locked in this consolidation period until the name takes out its late June high. A strong earnings report and good guidance can help with that. While the AI trade has dominated the tech and communications sector leaderboard, NFLX has just been quietly biding its time. I’d use $1,100 as a stop, below there and the market is telling us there could be a problem. Your risk is a significant downside surprise that gaps the stock well below that level, but let’s be honest with ourselves – that’s the risk in every trade. Absent that occurring, I like the risk-reward setup from here with the defined catalyst coming in just a few days. DISCLOSURES: (Josh owns the stock.) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . 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