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Make Netflix (NFLX) Volatility Work for You

NFLX gained 5% yesterday. Could it jump even further today?


In any given market, there is always a handful of what I call “crazy trade” stocks. These are the stocks that everyone knows about, because they are usually a company that everyone either uses, or that everyone knows all about. Over the past several years, Netflix, Inc. (NASDAQ:NFLX) has been one of those crazy trading stocks.

The DVD and streaming video entertainment company became a huge success with consumers a few years ago, and just about everyone I know loves the service. Investors have shown the stock much love too, and over the past five years shares are up a tremendous 408%.

Of course, this movie has been replete with a whole lot of volatile drama.

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The stock’s real move higher came between January 2010 and July 2011, when NFLX went from $53 to over $295 dollars. Then from that July 2011 high to September 2012 the stock came back down to $54. Fast forward to today, and the stock trades comfortable at just over $192, and this volatility is what makes it one of my crazy trade stocks.

In Tuesday trade, NFLX surged nearly 6.5% after analyst Andy Hargreaves of Pacific Crest Securities raised price target on the stock to $225 from the now outdated target of $160. Hargreaves kept his “Outperform” rating on the stock. In his note to clients, Hargreaves wrote that the company’s database of subscriber viewing habits will likely help it determine the best ways to invest in original content, and the best ways to add third-party content that appeals to a big audience.

This upbeat call on NFLX is the kind of opinion that gives both traders and investors a reason to keep buying this widely held trading vehicle. If you’re like me, and you like to trade momentum stocks on their way up, then yesterday’s move in Netflix could be the first step to a move well into the $200 range.

If the stock moves to Hargreaves $225 target, it will represent about a 17% gain from current levels, a move that seems very doable given this stock’s crazy trade status. As always, if you buy NFLX here, make sure you have a stop-loss order in place around 8% below your buy price.


At the time of publication, Jim Woods did not hold a position in any of the stocks mentioned here.

Article printed from InvestorPlace Media,

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