Netflix (NFLX): Good earnings pop stock into bullish pennant

Once restricted to theaters, first-run motion pictures are now showing at home. The leading provider of online access to the movie world is headquartered in Los Gatos, California.

Netflix (NASDAQ: NFLX) is the world's largest internet movie rental service, providing more than 7 million subscribers access to more than 85,000 DVD titles via U.S. mail delivery. Netflix also has a growing library of more than 5,000 choices that can be watched instantly on customers' PCs. Netflix does not have due dates/late fees, and it employs user ratings to predict individual preferences and make movie recommendations. The firm has regional distribution centers throughout the United States. Blockbuster (NYSE: BBI) is a major competitor.

Investors were pleased this week when Netflix reported Q3 EPS of 23 cents and revenues of $294 million. The Street had been looking for 15 cents and $286.8 million. A total subscriber base of 7.02 million topped the analyst estimate (6.8M). Churn of 4.2 percent was below the Street expectation (4.5%). Management also guided Q4 EPS to 9-16 cents (4 cent consensus) and Q4 revenues to $297-$302 million ($284.54M consensus). The share price popped on the news and then moved into a bullish "pennant" consolidation pattern. Stocks frequently exit pennants moving in the same direction they were traveling on entry. In this case, that would be to the upside.