I’ve said it time and time again, and I’ll say it once more. When it comes to trading Netflix (NASDAQ:NFLX) stock, follow the content.

Quite simply, when Netflix’s original content is good, it usually leads to increased public awareness. Increased public awareness usually leads to strong subscriber growth. And strong subscriber growth usually leads to NFLX stock trading higher.

We saw this trend materialize for the first time in the third quarter of 2016. Over the past several quarters, Netflix had made a huge pivot into original content, and was spending an arm and a leg to develop that original content. Investors were skeptical of that big spend. But, the summer of 2016 original content line-up was phenomenal, headlined by Stranger Things. Netflix reported blowout numbers, especially on the subscriber front, and NFLX stock jumped from under $100 to $130.

In most quarters since, Netflix’s original content line-up has been pretty good, and as such, the subscriber numbers have been pretty good, too. That is why NFLX stock roared from $130 to over $400 from the third quarter of 2016 to the second quarter of 2018.

But, the second quarter of 2018 didn’t have a great original content line-up. Consequently, the subscriber numbers weren’t as good as expected or up to par with the standard Netflix had established for itself. NFLX stock dropped big.

Now, NFLX stock is rebounding. Why? Because the content line-up this quarter is improving, headlined by a few big hits which could potentially drive super-charged subscriber growth. As such, I think this quarter’s numbers will be quite good, and that NFLX stock’s near-term outlook is quite promising.

Here’s a deeper look.

Original Hits Are Powering the Netflix Rally

Over the past month, Netflix’s original content line-up has improved dramatically, thanks mostly to a few mega-hits.

At the top of the list is teenage rom-com To All The Boys I’ve Loved Before. The Netflix original movie has received sterling reviews from Mashable, Vox, and Washington Post, and users have given it a very strong 7.6 rating on IMDb, where it is listed as the third most popular movie in the world right now. Moreover, the movie has inspired a Twitter phenomenon of sharing love letters, a testament to just how widely watched the movie was.

Meanwhile, Spanish original The House of Flowers has an

8.1 rating on IMDb. It too has received broadly positive reviews from critics. Medical technology documentary Bleeding Edge has a 7.8 rating on IMDb and has also received broadly positive reviews. Netflix has also released originals Like Father, Disenchantment, Dark Tourist, I Am A Killer, and Extinction over the past month.

All together, it looks like Netflix’s original content line-up has really improved over the past month, headlined by the mega-success of teen rom-com To All The Boys I’ve Loved Before. That is helping drive NFLX stock higher.

New App Design Is Helping, Too

The rally in NFLX stock isn’t all because of a teen rom-com. Netflix has also reworked its app plenty of times over the past several months, and seems to finally be onto something with its new full-screen movie trailers.

If you open up your Netflix mobile app these days, the first horizontal listing you will see is “Previews” followed by a bunch of titles and circular pictures. Click on any one of those, and you will be brought to a full screen preview of that movie or TV show. You can hit play, find out more info about that content, or swipe left and right to get a preview of a different movie or TV show.

This new design feels a lot like the movie trailer version of Snapchat or Instagram Stories. It takes the full-screen visual Story framework, and makes it work with movie and TV show previews.

It is a genius movie. Mobile content engagement is shifting from News Feed format to Stories format, and Netflix is now at the front of that trend. I don’t think this redesign will provide a big boost to subscriber growth. Rather, the redesign is simply a sign that Netflix remains ahead of its competition, and that should help keep NFLX stock afloat for now.

Bottom Line on NFLX Stock

In the long run, I’m still worried about big competition converging on a big valuation. But, in the near-term, original content strength and a Stories-format app redesign are improving the Q3 outlook for NFLX stock.

As such, I expect this rebound in NFLX stock to continue for the next several months. During that stretch, NFLX stock will likely retake the $400 level.

As of this writing, Luke Lango did not hold any positions in the aforementioned securities.