Saying Netflix (NASDAQ:NFLX) has been on fire would be an understatement. Shares have been roaring higher over the past week and even though the broader market has been rebounding as well, the outperformance in NFLX stock is still noteworthy.
Shares are up more than 45% from the March low. However, with the S&P 500 up more than 30% from its low, that doesn’t paint the whole picture. NFLX stock is up more than 30% so far this year, while the S&P 500 is down 11%.
Netflix stock hit new all-time highs last week, and has pulled back about 3.5% from those levels. That’s as the S&P 500 is down 15% from its highs, while the PowerShares QQQ ETF (NASDAQ:QQQ) is down “just” 11%. It goes beyond the broader market though.
NFLX Stock Is the Top FAANG Name
When it comes to FAANG, it’s become a two-horse race. We know Netflix is doing well, but so too is Amazon (NASDAQ:AMZN). The e-commerce giant continues to hire tens of thousands of new workers as it struggles to keep up with demand. Despite delaying its Amazon Prime Day, the company has announced 175,000 new hires in the last two months.
As a result, the stock is up 30.5% on the year, barely lagging Netflix’s 34.5% gain. However, AMZN shares are just 1.8% off its all-time highs, which like Netflix, were also set last week.
I call it a two-horse race simply because Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Facebook (NASDAQ:FB) trail so significantly. While these are all high-quality companies, the stocks are not trading as well.
Apple is doing the best, down “just” 13.5% from its highs, while GOOGL and FB sit 16.1% and 19.7% off their highs, respectively. As it pertains to year-to-date performance, all three are still lower on the year, down between 3% and 12%. Put simply, Netflix is the best-performing FAANG stock.
What do Amazon and Netflix have in common that Alphabet, Apple and Facebook do not? Simply put, their products are in demand.
Amazon cannot keep up with online orders and demand from its customer base, while streaming video demand has gone through the roof for Netflix. In some parts of the world, Netflix and others have had to throttle streaming qualities due to high demand.
Apple has surely seen lower product demand as it closed retail locations. While Google and Facebook properties have seen a surge in demand, digital ad revenue remains under intense pressure. As a result, revenue and profits are likely to be pressured despite the bump in traffic for Google, YouTube, Facebook and Instagram.
When Netflix reports earnings on Tuesday, April 21, investors will want to hear just how much the company’s product has been in demand. How many subscribers did it add domestically and internationally? How many hours did streamers gobble up?
It’s hard to imagine a disappointing quarterly report from the company. However, how the stock behaves leading up to the report and how it trades after will be a point to watch next week.
The Bottom Line
Last week was a big week for NFLX stock. Shares broke out over $380 range resistance, a mark that has kept a lid on the stock for almost two years. However, Netflix didn’t stop there. Shares then broke out over $420 resistance, where it formed a double top in mid-2018.
The resulting breakout sent shares up toward $450, topping out at $449.54. On the ensuing dip, shares ended the week at $422.96, just above the prior highs.
If NFLX stock continues to pull back ahead of earnings (or does so after), I am a buyer into prior range resistance near $380. This would be an ideal retest zone for bulls, giving investors another opportunity to accumulate the stock at the former breakout zone.
This also gives investors a reasonable risk-reward balance — particularly if the $380 retest comes after the report. I say that because a notable close below $380 could be the stop-loss for shorter-term investors. A move below $380 could trigger a return toward $330 to $340, where NFLX stock will find its 50-week and 100-week moving averages.
On the upside, see if Netflix can hold its former highs near $420. If so, it puts last week’s high back in play.