FANG Stocks: Netflix (NFLX)
NFLX stock is one a lot of investors are kicking themselves over. Shares languished below $100 through most of 2016. At the time, some feared higher content costs and sloppy overseas execution.
Those fears still exist to some point, but Netflix has shown better execution as of late. As a result, shares have catapulted to north of $140. The stock has been consolidating nicely around this level. With the 50-day moving average just below, it appears Netflix may be setting up for a move to new all-time highs.
Investors who want to buy now could use the 50-day moving average — or a price just below — as their stop-loss. They could also wait for a possible decline to its 200-day moving average, currently just below $115, to buy. Longer-term investors may consider initiating a position in the name, with a plan to purchase more on additional declines.
The problem with NFLX stock is simple: valuation. Not many investors question the shift in video content consumption. The trend is in favor of Netflix, which holds a dominant position in the streaming world. I consider Netflix a very battleground-based stock. On the one hand, it’s trailing P/E ratio of 384 is near the top of its five-year range. On the other hand, its forward P/E ratio is the lowest it’s been in the same time frame.
The streaming offerings from Alphabet’s YouTube, as well as Hulu could also be a concern. For now, the bulls seem to be in control of NFLX stock. Should Netflix’s execution deteriorate or competition eat into its growth, the narrative may change. But for now, staying long Netflix seems like it will work.