Title: Soaring Netflix Stock: Pushing Towards the Four-Digit Mark Soon
Title: Soaring Netflix Stock: Pushing Towards the Four-Digit Mark Soon
Netflix's shares soared an impressive 9.7% on January 22, hitting a record high of $999, following an outstanding earnings report that beat expectations and surpassed 300 million subscribers. Despite temporarily settling at $953.99, this bullish signal indicates Netflix may soon surpass the four-digit mark.
This recent bullish rally coincides with historically low implied volatility (IV), a combination that often sparks tailwinds. In the last five years, there have been eight instances where Netflix's equity was within 2% of its 52-week high and had a Schaeffer's Volatility Index (SVI) in the 20th annual percentile or lower - like how the current SVI of 25% resides in the 6th percentile of its annual range.
After one month, the equity showcased a 75% win rate and averaged a 4.7% return. A similar growth pattern would see Netflix surpass $1,000 in just over a month from its current position of $979.92.
Technical support levels on the chart are noteworthy, including the upper rail of a channel of higher highs that Netflix has maintained since August. A breakthrough might signal an even stronger rally for the stock. Moreover, at its new +10% year-to-date level, chart support could amplify. The 80-day moving average also provided strong assistance earlier this month.
Analysts are yet to adjust their ratings, with 41 in coverage and 16 still on the fence with "hold" or "strong sell" ratings. Netflix's consensus 12-month price target of $1,047.20, while a 6.6% increase from its current price, might not fully capture its true potential.
Netflix's resilience near its 52-week high with low implied volatility can be attributed to favorable trends. For instance, while Netflix posted positive earnings of $4.27 EPS, which surpassed analyst estimates, some analysts expressed concerns over the stock's valuation, leading to downgrades like Philips Securities permuting it from Neutral to Reduce, albeit with a raised price target of $870.
Despite these mixed sentiments, institutional investors and hedge funds have displayed heightened interest in Netflix, accounting for 80.93% of the stake. Interestingly, insiders have on some occasions sold shares, which could be indicative of reduced confidence in the stock's potential performance.
Technical indicators suggest the stock might be overbought, leading to a potential correction. This short-term volatility, however, cannot completely dismiss Netflix's potential for long-term growth, influenced by a host of robust factors such as its thriving ad business, operational success, and membership growth.
The surge in Netflix's shares could potentially attract more investors to the money markets, as the stock nears the four-digit mark. With analysts still holding on to 'hold' or 'strong sell' ratings, the markets might see an upward revision in Netflix's consensus 12-month price target, further boosting interest in money markets.