Trade of the Day: Time to ‘Binge’ on NFLX Stock Again?

by Sam Collins | August 21, 2015 1:20 am

Netflix Inc (NFLX[1]) — This popular streaming video service reported its subscriber count jumped 31% in Q2 from a year ago to 65.6 million globally. Of those, 42 million are in the United States, where Netflix sees the potential addressable market as being in the 60 million to 90 million range. It is also quickly capturing international market share with over 23 million customers in about 50 countries. It looks to reach 200 countries by 2016.

Revenue increased 26% in 2014, and analysts at Capital IQ estimate sales will increase by 23% in 2015 and 25% in 2016. Their 12-month target price for NFLX stock is $128, which is based on a price-to-sales ratio of 6.3 times their 2016 estimate.

Analysts have been upping their price targets for NFLX stock, with the most recent coming from UBS on Thursday. The firm boosted its target to $143 from $116.

Despite the upgrade, NFLX stock plummeted 7.8% on the day on broader market weakness. Sell-offs like this present an opportunity to add this excellent growth candidate to intermediate- and long-term portfolios. Shares are now trading at a 13% discount to their all-time high of $129.29 (adjusted for the 7-for-1 stock split in July), made on Aug. 5.

NFLX stock broke out from a three-month consolidation when it gapped up from $69.50 in April. Shares vaulted to a new high just over two weeks ago for a four-month advance of more than 85%.

After a move like that, we would expect NFLX stock to become the target of profit-taking, especially following an exponential jump above its firmly established bull channel. Try to buy NFLX stock at its 50-day moving average at $106 with a trading objective of $130 for a return of 23%. My 12-month target is $145.

Click to Enlarge

[2]

Source URL: https://investorplace.com/2015/08/netflix-inc-nflx-stock-trade-of-the-day-2/

---