Netflix, Inc. (NASDAQ:NFLX) subscriber growth — the key driver for Netflix shares — is expected to slow dramatically
Netflix’s upcoming earnings report may not send the stock rallying, but the stock is still a good buy in the long run, according to Credit Suisse.
Analyst Douglas Mitchelson, who has an outperform rating and a $440 a share price target, said subscriber growth will continue to be the primary driver for the stock. However, subscriber growth is expected to slow dramatically.
Mitchelson said global downloads generally correlate with Netflix’s subscriber growth. He noted that global downloads expanded by 35 percent in the first quarter from a year earlier but were down from 48 percent in the fourth quarter.
Netflix’s guidance for net additions on a quarter-over-quarter basis was also flat, which is well below a seven-year average of 1 million. “Netflix has guided 1Q19 net adds to be the 2nd smallest sequential improvement in its history,” Mitchelson said in a note titled, “Will 1Q19 Results Spark Joy?” — a nod to the show “Tidying up with Marie Kondo”.
“We believe the reason, more so than Netflix’s estimated influence of price increases, … likely reflects a ‘demand pull forward’ scenario, where an abnormally strong 4Q18 pulled forward demand from the next quarter,” Mitchelson wrote.
“We believe this has happened before; after a very strong 4Q16 net add performance Netflix actually missed its 1Q17 guidance,” he added.
Netflix added 8.8 million subscribers in the fourth quarter of 2018, slightly more than expected. But worries over the company’s ability to expand its subscription base have increased recently as more companies like NBC and Disney jump into the streaming space.
Long term, he said, the stock should be a good buy for investors as the streaming giant builds on its original content with shows including “The Umbrella Academy,” “Stranger Things” and “Tidying Up.”
He also said recent price hikes should boost revenue-growth acceleration. Netflix announced in January price hikes ranging 13 to 18 percent for its streaming plans.
Netflix is scheduled to report first-quarter earnings on April 16. The stock has surged more than 37 percent this year through Tuesday’s close.
Overall, the bias in prices is: Upwards.
Note: this chart shows extraordinary price action to the upside.
The projected upper bound is: 389.90.
The projected lower bound is: 351.39.
The projected closing price is: 370.64.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 27 white candles and 23 black candles for a net of 4 white candles.
A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.
Three white candles occurred in the last three days. Although these candles were not big enough to create three white soldiers, the steady upward pattern is bullish.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 90.7675. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a buy 3 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 57.52. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 51 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 91. This is not a topping or bottoming area. The last signal was a buy 3 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 6 period(s) ago.
Rex Takasugi – TD Profile
NETFLIX INC closed up 2.030 at 369.750. Volume was 48% below average (neutral) and Bollinger Bands were 50% narrower than normal.
Open High Low Close Volume___
369.260 373.410 366.190 369.750 5,376,623
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 363.40 354.81 339.85
Volatility: 38 35 56
Volume: 6,783,611 7,609,224 11,531,257
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
NETFLIX INC is currently 8.8% above its 200-period moving average and is in an downward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of NFLX.O at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on NFLX.O and have had this outlook for the last 5 periods.
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