What happened
Netflix (NFLX -3.92%) outperformed a rising market on Wednesday. Shares were up 9% as of 3:26 p.m. ET, compared to a 2.1% increase in the S&P 500. That rally, though, hardly erased any of the losses that shareholders in the streaming giant have endured recently. The stock remains down by about 70% year to date.
Yet that slump, plus some potentially good earnings news on the way, laid the groundwork for Wednesday's share price rebound.
So what
The main factor pushing Netflix's stock higher appears to be a rebound in optimism about some of the companies that were hit hardest during the current bear market decline. The streaming video giant entered 2022 with a market capitalization of nearly $250 billion. Today, it's valued at just $80 billion.
On a day when the tech-heavy Nasdaq Composite index also jumped, and many hard-hit stocks are rising, it makes sense that Netflix would gain ground too.
There's also good news on the content front: Netflix recently teased a second season of the hit show "Squid Game." And some investors see the streamer as a potential takeover target now that its market cap is low enough to make it an easier purchase.
Now what
Shareholders would prefer to see the company set its own path forward, starting with improving results in its fiscal second quarter. The earnings release covering that period will happen on July 19, Netflix said Wednesday.
It's possible that the stock price rally reflects the idea that Netflix could surpass expectations for the quarter. Those expectations have never been lower, after all. Co-CEO Reed Hastings and his team projected back in April that net subscriber losses would land at 2 million for the period. If Netflix instead made progress at recapturing lost engagement and is ready to release its ad-supported model, then it could again become a popular growth stock on Wall Street.
For now, though, expectations are for sales growth to remain below 10% for a second straight quarter -- roughly half the rate that many would consider a robust pace for the business.
