Netflix – The Streaming King
Netflix is still one of the most popular stocks, even with it losing rights to movies such as Disney and Pixar Productions, or Friends. Over the last couple of years, there have also been talks regarding whether Netflix’s success will continue, with new competitors joining the market such as Disney+, Apple Live and AT&T. However, the stock has doubled in size in less than 12 months, with its highest success this week as the company’s next quarterly figures are about to be released.
The stock has been increasing consecutively, with a gain of 29% over the past 10 trading days. This has increased the company’s market value to $250 billion. The surge makes Netflix more valuable than Walt Disney, AT&T, Verizon Communications, or Comcast. The streaming-video company is almost even with the chip giant, Intel.
Netflix is a striking contrast to a broader market that has declined amid the COVID-19 pandemic. A major factor in Netflix’s success in recent months is that home-bound consumers globally have sharply increased their streaming of television and movie content on Netflix. Many consumers are expected to remain at home even amid governments’ plans to re-open parts of the U.S. and other parts of the world. There have also been rumours of a possible second global lockdown.
Investors will closely look at whether Netflix’s gains are sustainable long term when it reports earnings for the second quarter on the 16th July after the market closes. As the release gets closer, traders should expect higher volatility and possibly even the days after.
A key element which traders and the market will look at, is the total paid streaming subscribers for Netflix during quarter 2. In order to sustain growth in earnings per share and revenue, Netflix must continue to add to its subscriber base, especially in international markets where it sees the fastest growth. In the second quarter, analysts expect Netflix’s total paid subscribers growth to be the strongest in the past 5 quarters.
Goldman Sachs raised its price target on Netflix, Inc. to a “market high” of $670 on Friday, expecting the streaming entertainment giant’s second quarter profits and revenues to match or exceed the first quarter’s outstanding results. Wall Street consensus on Netflix stock has moved steadily into the “Moderate Buy” column so far in 2020, with 22 “Buy” and 9 “Hold” ratings highlighting an increasingly bullish outlook. However, four analysts are still recommending that shareholders sell their positions.
Even with a lot of talk from different large organizations such as Goldman Sachs and JP Morgan, nobody in the market can guarantee the figures which are likely to be released, or the market’s reaction. Over the previous years, Netflix has witnessed a positive Earnings Per Share, but yet shareholders sold the stock. When there are large movements it also tempts traders to cash in profits.
Until now we’ve spoken mainly about the fundamental side of Netflix and the movement so far. However, traders also need to bear in mind the technical analysis, which is the analysis of the charts. Technical analysis is just as important as looking at the prospects of the company. Some traders even deem this to be more important.
So far we have seen strong price action towards a neverending upward trend. However, traders should be aware that the higher the price goes the more traders will possibly want to cash in. On Monday we saw the largest bearish candlestick which was larger than the previous 4 bullish candlesticks.
Traders should expect a lot of volatility not only on Netflix but also generally within the stock market as quarterly reports continue to be released. In addition to looking at the profits, assets and liability reports, traders should also keep referring to technical elements of analysis to ensure their timing is correct and not entering at a price reversal or retracement.