Netflix Stock on Bullish Path to Higher Prices
Netflix Streaming its Way to New Records
Streaming video leader Netflix, Inc. (NASDAQ: NFLX) made a historical break at $200.52 last Friday and, based on the options market pricing, the stock could surge another 10% or so if it can deliver a blowaway quarter on Monday.
Netflix has been on an impressive run-up since trading at around $10.00 in 2012 and breaking higher shortly after, with a bullish golden cross pattern that is still holding after five years. This pattern represents the positive constant sentiment of buyers.
With the exception of a small correction in 2014 and a bigger adjustment in 2016, NFLX stock has been remarkably bullish, with strong technical strength throughout.
Chart courtesy of StockCharts.com
The options market shows a potential 10% swing in either direction. If Netflix disappoints, the stock could fall to around $180.00 or lower, representing the reliable 50-day moving average as major support.
Chart courtesy of StockCharts.com
Over the past year, NFLX stock fell to—or just below—the 50-day moving average in April, June, July, and August. In each case, the stock managed to rally to new highs.
Also Read:
Forget Amazon, Here’s Why Netflix Stock Is 2017 Media Streaming Giant
Netflix, Inc.: Why NFLX Stock Surged
The same could happen this week, which, for the aggressive trader, represents an opportunity.
Why the Bears Are Wrong on NFLX Stock
Now, the bears would argue that the valuation of Netflix is obscene, at 244 times trailing earnings or 94 times its 2018 earnings. The bears have a case, but the stock chart reminds us that betting against NFLX stock has not really worked out for the short sellers.
Wall Street has a consensus $195.00 price target on Netflix stock, but two firms have raised the target. JPMorgan Chase & Co. is targeting $225.00 while Goldman Sachs Group Inc is predicting $235.00.
The key for the third quarter will be the user growth metric, which tends to be what powers Internet and social media stocks.
The consensus target for user growth is at around 11 million. A big beat on the upside could see Netflix stock surge toward $220.00.
What you also want to monitor is the U.S. versus international user growth. In the past, the international component has been behind Netflix’s growth, but we are seeing some strength in domestic growth, as Netflix works on delivering better content.
Analyst Take:
I’m bullish on Netflix, especially on price weakness that’s down toward the 50-day moving average.
My bull thesis is based on Netflix being at the top of the streaming content market, with minimal threats from its rivals.
The company’s recent announcement that it will raise prices in the domestic market will be closely watched by investors. In the past, any increase in the price would generally result in subscription cancellations, but, with the content being so good now, the impact could be minimal.
The bottom line is that Netflix remains a go-to stock, especially when it’s on sale.
