Netflix Stock - See What's Next
Netflix, Inc. (NFLX) stock is trading above $517 again since December 14th, the session after The Food and Drug Administration (FDA) authorized Pfizer’s Covid-19 vaccine for emergency use, clearing the way for millions of highly vulnerable people to begin receiving the vaccine within days and triggered a wholesale exodus out of 2020's biggest COVID-19 beneficiaries. A string of new lockdown orders and a subscription increase to a standard $13.99 per month are likely responsible for the sentiment change, with market players considering the positive impact to fourth quarter earnings.
Netflix stock hasn't budged since July but is maintaining a 64% year-to-date return, underpinned by strong subscriber growth as a result of the pandemic. It could end 2020 near the all-time high at $575, following a synergistic seasonal tendency for market leaders to surge into year end.
The stock sold off nearly 7% in October after the streaming giant missing third quarter subscriber estimates and lowered fourth quarter guidance. Many analysts lifted their price target despite the report, satisfied that the volatile highs and lows of 2020 would ultimately translate into strong trendline growth.
Netflix Daily Chart (2018 – 2020)
A multi-year uptrend topped out at $423 in July 2018, giving way to a decline that ended at an 11-month low near $250 in December. The 2019 recovery wave stalled in the $380s in May, marking resistance into an April 2020 breakout. The stock tested that level into June and turned sharply higher, posting an all-time high less than one month later. The subsequent decline into the 50-day exponential moving average (EMA) completed the outline of a rectangle pattern that remains in force as we close the last month of 2020.
The on-balance volume (OBV) accumulation-distribution indicator posted an all-time high in June 2018 and slumped to a 21-month low in September 2019. Buying power since that time has failed to mount either the 2018 or 2019 high, setting off a major bearish divergence that intensified into July 2020. This deficit is hanging like a dark cloud over the stock, but up to this point at least, it has had little impact on price action.
The 38 analysts offering 12-month price forecasts for Netflix Inc have a median target of 585.80, with a high estimate of 700.00 and a low estimate of 235.00. The median estimate represents a +10.19% increase from the last price of 530.87.
Bottom Line
I believe NFLX is well positioned to soar in the upcoming months despite gaining 64% year-to-date. With coronavirus fears pushing consumers to practice social distancing, online streaming services could see a surge in demand in the near-term.
Analyst sentiment, which gives a good sense of a stock’s future price movement, is impressive for NFLX. It has an average broker rating of 1.64, indicating favorable analyst sentiment. Out of 40 Wall Street analysts that rated the stock, 28 rated it a “Strong Buy or Buy”. The consensus EPS estimate of $1.38 for the current quarter ending December 2020 indicates a 6.1% improvement year-over-year. The consensus revenue estimate of $6.60 billion for the current quarter indicates a 20.6% increase from the same period last year.