After enduring a bear market for approximately a year, with its stock price having fallen nearly 20% year-to-date and experiencing sell-offs following its last four earnings reports, a shift in sentiment appears to be brewing for Netflix (NFLX.US). In the lead-up to its earnings report this Thursday, options traders are displaying notably increased bullishness.

Data from ThinkOrSwim indicates that over the past two trading sessions, the trading volume for call options linked to Netflix was nearly three times that of put options. Concurrently, one of the most popular trades involved selling at-the-money put options.

Technical indicators are also showing positive signs. The current stock price of around $75 aligns with the level seen in February when the company abandoned its pursuit of acquiring Warner Bros. Discovery. Notably, it was near this same price point in late 2021 that Netflix's stock began a steep decline, plummeting as much as 80%, before embarking on a multi-year recovery that peaked last June at $134.

Todd Gordon, Founder and Chief Investment Officer of Inside Edge Capital, commented via email: "Netflix is testing its rising 200-week moving average and the $70 level, which acted as resistance from late 2021 before eventually being breached. If this $70 technical support holds, it might be time to consider re-entering the stock."

According to data from Cboe LiveVol, current options pricing implies a potential post-earnings stock move of 7.6% in either direction, closely matching the average actual move of 7.4% over the past year. While the stock has declined following the last four earnings releases, it had risen for three consecutive reports prior to that.

Media observers point to a lack of major hit content in the recent quarter, leading to decreased viewer engagement. Nielsen data shows that Netflix's share of television viewing has dropped to its lowest level in over a year. Rich Greenfield, Co-founder and TMT Analyst at LightShed Partners, noted: "Netflix hasn't launched a major hit this year. While Nielsen data shows improved engagement in the US, average viewing time per subscriber has slightly declined amidst overall subscriber growth. Part of this is likely due to newer ad-tier subscribers watching less than legacy ad-free members, compounded by intensifying industry competition."

The most actively traded option contract on Monday was the $75 strike put expiring this Friday. A significant seller unloaded 500 contracts, collecting nearly $150,000 and fueling the activity. SpotGamma data shows that of the roughly 20,000 total trades for that contract on Monday, approximately 15,000 were sell transactions.

Wall Street's Optimistic Stance Ahead of Results

Netflix is scheduled to report its second-quarter earnings after the market closes on Thursday. Consensus estimates project earnings per share of $0.79 on revenue of approximately $12.58 billion. The company had previously forecast Q2 revenue around $12.57 billion, representing year-over-year growth of about 13.5%, while maintaining its full-year revenue guidance between $50.7 billion and $51.7 billion.

Advertising remains a critical focus area, with the company's global advertising-supported plan now boasting over 250 million monthly active viewers. Netflix has also stated its intention to double its advertising revenue to roughly $3 billion by 2026 and plans to expand its lower-priced ad-supported tier to more international markets.

Investors are expected to closely monitor updates on subscriber trends, advertising monetization, and content spending, especially following the recent transition of co-founder Reed Hastings from the role of Executive Chairman.

Overall, Wall Street analysts maintain a favorable view of Netflix. According to TipRanks data, the consensus rating is a "Strong Buy," with an average price target of $112.70, implying a potential upside of over 50% from current levels.