TLDR
- Netflix (NFLX) stock has dropped from its July 30 record high of $1,341.15 to $1,225.62
- Technical analysis shows NFLX is testing a bullish trendline that has historically led to 11.1% average gains
- The stock has returned +4.9% over the past month, outperforming the S&P 500’s +1.3% gain
- Netflix maintains a Zacks Rank #1 (Strong Buy) rating with earnings expected to grow 31.4% this fiscal year
- Current quarter earnings estimate of $6.88 per share represents 27.4% year-over-year growth
Netflix stock has pulled back from its summer highs, creating what analysts see as a buying opportunity. The streaming giant’s shares peaked at $1,341.15 on July 30 before retreating to current levels around $1,225.62.
This pullback has put NFLX at a technically interesting spot. The stock is now testing what Schaeffer’s Senior Quantitative Analyst Rocky White calls a “historically bullish trendline.”
The technical setup looks promising based on historical patterns. NFLX is within 0.75 of the 80-day trendline’s 20-day average true range after spending most of the recent period above it.
This specific pattern has appeared nine times over the past three years. In those instances, the stock moved higher one month later 89% of the time.
The average gain during those periods was 11.1%. If Netflix follows this historical pattern, shares could reach $1,361.66, which would set a new record high.
Strong Fundamental Backdrop
The technical picture aligns with solid fundamental metrics. Netflix has outperformed the broader market over the past month with a 4.9% return compared to the S&P 500’s 1.3% gain.
Earnings expectations remain robust for the streaming company. Current quarter estimates call for $6.88 per share, representing 27.4% year-over-year growth.
For the full fiscal year, consensus estimates point to earnings of $26.06 per share. This would mark a 31.4% increase from the prior year.
Looking ahead, next year’s earnings are projected at $32.16 per share, indicating continued growth momentum of 23.4%.
Revenue forecasts also paint an encouraging picture. The current quarter is expected to deliver $11.52 billion in sales, up 17.3% year-over-year.
Recent Performance and Outlook
Netflix’s last reported quarter showed revenues of $11.08 billion, a 15.9% increase from the same period last year. Earnings per share came in at $7.19 compared to $4.88 in the prior year quarter.
The company has beaten consensus earnings estimates in each of the trailing four quarters. Revenue estimates were exceeded in two of those four periods.
Options traders appear to be pricing in relatively low volatility expectations. Netflix’s Schaeffer’s Volatility Index sits at 25%, ranking in the low 5th percentile of its annual range.
This low volatility environment could favor call options strategies for those betting on the technical rebound scenario.
Netflix carries a Zacks Rank #1 (Strong Buy) rating, though the stock receives an F grade on valuation metrics, indicating it trades at a premium to peers.
Current fiscal year revenue estimates of $45.03 billion suggest 15.5% growth, while next year’s projection of $50.82 billion points to 12.8% expansion.
