Netflix's Profits Clash With Peaking Business Concerns, Driving Interest In Direxion's NFLX Bull And Bear Funds

Content streaming juggernaut Netflix Inc. NFLX continues to set expectations ablaze, thereby seemingly justifying its market performance this year. Last week, the media giant posted second-quarter financial results that exceeded analysts' expectations. In fact, the company's net profit of $3.1 billion represented a fresh record. However, the volatility of NFLX stock following the results has led to probing questions.

On the positive front, it's difficult to deny the underlying narrative of consistently robust financial performances. In the second quarter, Netflix generated revenue of $11.08 billion, up 16% against the year-ago period. Furthermore, this tally exceeded Wall Street's estimate of $11.04 billion. On the bottom line, the company reported earnings per share of $7.19, beating the consensus view of $7.06.

In addition, Netflix's extensive content library continues to churn out winners, resonating with audiences amid an intensely competitive environment. Management highlighted multiple series and movies that saw strong performances, in particular the release of the third season of "Squid Game" in June. Despite its recent launch, the season has already amassed 122 million views, making it the sixth highest in Netflix history.

Finally, advertising has become a major sales booster. New research shows that roughly half of new Netflix subscribers in 2025 have signed up for the ad-supported tier. In 2024, this metric was about 40% and in the year prior, only about 20%. Investors may view the consistent growth as a motivating factor to consider NFLX stock.

Still, every publicly traded enterprise carries counterarguments to the bullish narrative. For Netflix, there are concerns about anemic engagement. Specifically, while Needham's Laura Martin reiterated a Buy rating on NFLX stock with a $1,500 price target, she cautioned that total viewing time per user appeared to be flat to declining. This dynamic must improve for Netflix to sustain its pricing power.

Furthermore, investors should consider the possibility that most of the good news has been baked into NFLX stock. For example, Netflix earlier cracked down on the practice of password sharing, which has led to increased revenue. However, now that the company has largely monetized a significant portion of free users, the well may have effectively run dry.

To be sure, the performance of NFLX stock stands out. Since the beginning of the year, it gained almost 36%. However, in the trailing five sessions, NFLX slipped 4%. And in the past month, the security is down nearly 2%, which may raise concerns about fading momentum.

The Direxion ETFs: With opposing sides of the sentiment debate presenting strong arguments, traders may have ample opportunity to speculate, thereby shining a spotlight on Direxion's exchange-traded funds. For optimistic speculators, the Direxion Daily NFLX Bull 2X Shares NFXL seeks the daily investment results of 200% of the performance of NFLX stock. For the skeptical, the Direxion Daily NFLX Bear 1X Shares NFXS seeks 100% of the inverse performance of the namesake security.

A key motivating factor for consideration of Direxion ETFs is convenience. Typically, market participants interested in leveraged or short positions must engage the options market. However, derivative financial products carry complexities that may not be appropriate for all investors. In contrast, Direxion ETFs can be bought and sold much like any other publicly traded security, thus greatly reducing the learning curve.

Still, prospective participants must be cognizant of these funds' unique risk profile. First, leveraged and inverse ETFs tend to be more volatile than funds tracking benchmark indices, such as the Nasdaq Composite. Second, Direxion ETFs are designed for exposure lasting no longer than one day. Holding these ETFs longer than recommended may expose investors to value decay due to the daily compounding phenomenon.

The NFXL ETF: Unsurprisingly, the NFXL ETF has gained nearly 60% since the start of the year, buoyed by Netflix's consistent financial results.

The performance of the NFLX bull fund has been highly accelerative since April, initially driving the price action above key technical benchmarks.

However, the previously mentioned volatility has caused the NFXL ETF to drop below its 20-day exponential moving average and the 50 DMA.

The NFXS ETF: On the other end of the scale, the NFXS ETF has struggled this year, losing roughly 30% as Netflix continued to beat analysts' expectations.

Between April and early July, the price action of the NFLX bear fund has consistently traded below its 20-day EMA and 50 DMA.

However, the latest surge in the NFXS ETF has seen the price action pop above these key technical benchmarks on high volume, warranting further investigation.