Netflix
Netflix Analysis 11.02.2022Hello Traders,
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Is Ackman Right to Buy Netflix (NFLX)?Today we were discussing the purchases of Netflix NASDAQ:NFLX by Bill Ackman:
Ackman sent a letter to investors in his hedge fund saying he had bought more than 3.1 million shares of Netflix, the video streaming pioneer whose stock had seen such vast reversals in recent days that it had been trading at June 2018 levels.
At Netflix’s current price of about $390 per share, the purchase gives Ackman a stake worth more than $1 billion — and makes him one of Netflix’s top 20 shareholders.
That is a pretty bold buy from one of my favorite contrarian investors but do I like the trade? I'm going to use my own Technical Analysis to see before making a decision...
Why are Netflix shares down 30% in 2022?Netflix (NASDAQ: NFLX) shares have tumbled 30% YTD, similar to its tech brethren, who have by-in-large, been facing huge downward pressure. For interest sake, NFLX was down 37% from its all-time high in November 2021.
Two major events have eaten into the gains that NFLX made in 2021. The first is investor confidence waning in growth stocks in the face of looming interest rate rises. And the second has perhaps had a greater impact; a tepid earnings report.
Netflix shares experienced a significant sell-off two weeks ago, after releasing its Q4 2021 earnings report. The report noted that the pace at which Netflix is adding subscribers is slowing. Such a declaration typically spooks Netflix investors, who steadfastly hold the streaming platform still has plenty of room to grow and shrink its price-to-earnings ratio.
Before Netflix’s share price dipped by 30%, its PE ratio was ~60.0. As it stands, with Netflix trading at US $429.48 per share, its PE ratio is now ~38.0.
Netflix finally admits it is facing tougher competition
Typically shying away from doing so, Netflix has finally revealed that competition is hurting its subscriber growth. It is this admission that caught a lot of investors off guard.
In the past three years, Netflix has had to contend with a wave of competitors entering the streaming market, such as (in order of appearance) Apple TV+, Disney+, Peacock, HBO Max, and Paramount+.
The penultimate newcomer on the above list, the premium-placed HBO Max, has been the fastest-growing service of late, vastly outpacing Netflix and adding 73.8 million subscribers last year.
Similarly, Netflix is hurting from older streaming services increasing the appeal of their content libraries and raising investment in content creation. One such competitor, Amazon Prime, increased its spending on content by 41% to US $11 billion in 2020 from the previous year and have recently bid US $8.5 billion to acquire MGM studios and its content catalogue.
2022 looks to be a pivotal year for streaming
Will 2022 be the year that consumers start weaning off the numerous streaming services to which they are subscribed? As prices climb, this may be the likely outcome.
In this respect, Netflix may be on the back foot, having recently pushed its prices up to US $15.50 per month for its standard package. Netflix is now more expensive than the more ‘premium’ HBO Max at this price point.
One factor that could influence the price of Netflix shares over the year is whether their competition hikes their respective prices. For one, Disney+ might be expected to raise its prices before June, as its bargain pricing (introduced one year ago) becomes increasingly unsustainable. However, its attempt to hit ambitious growth targets may delay price hikes from the company.
If pricing over the different streaming services become more equitable, content becomes the deciding factor for consumers. Netflix, and Netflix’s share price, will be in a better position in this scenario as consumers by far prefer Netflix content over its competitors. As such, In 2021, even as competitors pumped funds into content creation, Netflix’s hosted 14 of the top 15 most popular TV shows and Movies.
Netflix - Possible relief rally?Key highlights:
1. Sitting in Daily demand zone
2. May try to reclaim 200MA cluster
3. Volume climax
4. Sitting at previous swing level
5. Formed a high volume bullish hammer on daily
6. RSI oversold on multiple time frames
Conclusion : Expecting a relief rally in the coming week.
Disclaimer : This is NOT investment advice. This post is meant for learning purposes only. Invest your capital at your own risk.
Happy learning. Cheers!
Rajat Kumar Singh (@johntradingwick)
Netflix: Great opportunity to buy the dipAfter a huge gap, investors such as Bill Ackman even the CEO of Netflix are buying the dip in this strong support line in all extreme oversold levels. We expect the price to recover if there are no bigger corrections on the main indices. Netflix is experiencing less growth due to higher competition but the company still has good numbers. It's a buy and hold.
NFLX current scenario and trading opportunitiesToday, we will take a look at NFLX after a massive gap.
Where is the price right now?
Is making contact with a weekly trendline that started in 2017; therefore, we have to consider this level a relevant zone to think in potential bouncing or breakout movements.
Bullish Scenario:
The price is able to bounce on the weekly ascending trendline and makes a breakout of the descending trendline of the current bearish movement. IF that happens, waiting for a correction after the breakout using previous scenarios as models to understand the size and duration of it is always a good idea. So, I have defined what I think the correction should look like. A new local high would be a confirmation of the bullish movement towards the next resistance zone.
Bearish Scenario:
The price is not able to bounce on the weekly trendline, and we observe a breakout. Waiting for a correction after the breakout of a relevant level using previous scenarios as models to understand the size and duration of it is always a good idea. So I have defined what I think the correction on the bearish movement should look like. A new local low after that would be a confirmation of the bearish movement towards the next support zone.
At the moment, my stand on NFLX is waiting and observing possible resolutions before taking action. Thanks for reading.
Jump On Netflix (NASDAQ: $NFLX) For Easy Bounce Opportunity! 🤑Netflix, Inc. provides entertainment services. It offers TV series, documentaries, and feature films across various genres and languages. The company provides members the ability to receive streaming content through a host of Internet-connected devices, including TVs, digital video players, television set-top boxes, and mobile devices. It also provides DVDs-by-mail membership services. The company has approximately 204 million paid members in 190 countries. Netflix, Inc. was founded in 1997 and is headquartered in Los Gatos, California.