Shares of streaming video innovator Netflix, Inc. (NASDAQ:NFLX) haven’t been doing much over the last few months. NFLX stock has been stuck in a sideways consolidation range since January as investors worried about user metrics and increased competition from the likes of Amazon.com, Inc. (NASDAQ:AMZN) and others.
After a test below its 50-day moving average in Monday’s midday trading was aggressively bid, Netflix stock looks ready for another upside run — possibly breaking out of three-month resistance near $145.
Back on March 6, NFLX stock enjoyed an upgrade from analysts at UBS — who raised their price target to $175 — on the expectation of increased Q1 2017 subscriber growth given momentum in Europe and Latin America as well as modest improvements in Japan. Year-over-year comparisons are also expected to be easier in the second quarter as user counts lap price increases pushed through last year.
From Doug Mitchelson:
“Notably, this momentum is during a 1Q17 stretch where original content releases are light and 1Q17 growth had been pulled forward into 4Q16 per management due to 4Q16’s strong originals — it would not have been surprising to see momentum soften in 1Q rather than the strengthening we are seeing. Also, Comcast commentary regarding the success of X1 integration of Netflix is encouraging and we expect ongoing churn reductions as Netflix adds more U.S. pay TV integration deals and as X1 penetrations rise. Note, we are less concerned with 2Q seasonality this year (a big issue last year) given easy churn comparisons against the 2Q16 price increases.”
Netflix continues to dominate media coverage, from an over-the-weekend Wall Street Journal story about how its dive into exclusive content is rattling Hollywood executives and driving up production costs industry-wide to how it’s set to move into the merchandising business with toys and clothing related to popular shows like Stranger Things.
Those drivers, as well as its newfound technical strength, bode well for NFLX stock in the weeks ahead.
The company will next report results on April 17 after the bell. NFLX analysts are looking for earnings of 37 cents per share on revenues of $2.6 billion.
Anthony Mirhaydari is founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers. Redeem by clicking the links above.
