NFLX is in stage #2. Netflix continues moving higher despite naysayers who think the stock is doomed because of the subscription sharing limitations and them canceling their subscription. But investors do not see it as a problem, at least not now. I expect the stock to reach 200-day MA on a weekly chart at $410 a share, but this process may take some time, and we may even see a few pullbacks on the way up. There will be resistance at $360 a share. The stock seems to stall now and possibly seeing the much-needed pullback. That makes the stock a “hold” for now.
The company’s revenue is slowing down (during 2022 we saw a significant reversal from rapid revenue growth). That may be concerning if we see the continuation:
The free cash flow of Netflix is quite horrible. It is a zig-zag move and most of the time between 2014 and 2020 the company was burning cash.
Unfortunately, the company is burdened with large debt and not enough cash to cover it. If interest rates keep rising higher, this may be a problem.
The current price action makes the stock overvalued on a fundamental basis again. I think the new subscription plan will be positive for the company and will be reflected in future earnings (not this earnings quarter, but we may see an impact as soon as Q1 2023). But given the current valuation and financial conditions of the company, I think the stock is a hold now.
The stock is now HOLD
This post was published in our newsletter to our subscribers on Sunday, January 28th, 2023. If you want to learn more about our stock technical analysis subscribe to our weekly newsletter.
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