Netflix Shareholders Looking For a Lift

Netflix Inc. (NFLX) shareholders hope for a big rally in reaction to the Q1 2022 earnings report on April 19, still shell-shocked after the first quarter’s massive sell gap and 35% haircut. The stock has carved decent upside since March’s two-year low but price action still hasn’t mounted a single level broken in the mini-crash. Accumulation has settled at 2019 levels at the same time, when the streaming giant was trading in the 280s.

Looking at Growth Estimates

Market players will be squarely focused on subscriber growth, acquisition costs, and geographical sales, looking for a sizable uptick in the 221.8 million customers on board at the end of 2021. It’s estimated that Netflix has penetrated 29% of the world’s broadband users and 33% of Pay TV subscribers. A small increase in these metrics would have a massively positive impact on revenue but each point requires huge effort in our ultra-saturated streaming market.

J.P. Morgan analyst Doug Anmuth has an ‘Overweight’ rating and lofty $605 target on the stock. He expects 300 million subscribers worldwide by 2025, marking an addition of 79 million subs in just three years. He expects Asia Pacific to grow at a rapid pace, with just 17% of potential customers now subscribed to the service. Other international markets could cancel out slowing growth in the U.S.A. and Canada, with projections for an increase of 27 million subs into 2025.

Wall Street and Technical Outlook

Wall Street consensus stands at an ‘Overweight’ rating, based upon 21 ‘Buy’, 3 ‘Overweight’, 16 ‘Hold’, 2 ‘Underweight’, and 2 ‘Sell’ recommendations. Price targets currently range from a low of $330 to a Street-high $700 while the stock is set to open Friday’s session about $48 above the low target. This placement looks accurate, given slowing growth and a lingering hangover after windfall sub additions in the first year of the pandemic.

Netflix broke out above the 2018 peak at 423 in April 2020, entering a powerful uptrend that stalled in the 570s in July. It mounted that barrier in August 2021, lifting in a vertical wave ending at 701 in November. It failed the August 2021 breakout in January 2022 and the April 2020 breakout after missing earnings two weeks later. A March breakdown through the January low near 350 failed, yielding a short-term buying signal that’s still in force.

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Disclosure: the author held no positions in aforementioned securities at the time of publication.