Vive le Netflix?
Netflix is taking another Eurotrip. The streaming video giant is already in the U.K., the Netherlands and Scandinavia. Now it's planning on expanding into France, Germany, Austria, Switzerland, Belgium and even tiny Luxembourg.
In 2013, just 16.3 percent of the company's $4.38 billion in revenue came from outside the United States. That's $712 million and 12 million customers from a market that didn't exist four years ago. But the world beyond the U.S. border is still a money loser for Netflix. In the most recent quarter, it lost $35 million on $267 million in revenue from its international operations.
But, will expansion into countries such as France and Germany – which have an estimated 53 million combined broadband households – mean euro-denominated profits ahead?
It better be profitable if it is to justify its current stock price, according to Gina Sanchez, founder of Chantico Global.
"They need to do a lot more of that in order to catch up with that valuation," said Sanchez, a CNBC contributor. "While these are all good moves, they also have a tremendous amount of competition. Amazon isn't sitting this down and even Yahoo is starting to emerge as a competitor. So, I do think that they have their work cut out for them."
[Yahoo! is a partner with CNBC on "Talking Numbers."]
Netflix's stock also has its work cut for it based on the charts, according to Richard Ross, global technical strategist at Auerbach Grayson. Since the start of the year, the stock has had back-to-back head and shoulders patterns – first a top one, now a bottom one– based on Ross' charts. He draws a neckline at around the 100-day moving average, which is currently at $379 per share.
"You want to watch the neckline of that pattern," said Ross, a "Talking Numbers" contributor. "That acts as your resistance right around current levels. So, I wouldn't chase the stock here shorter term."
For those looking to trade the stock on the longer-term, Ross suggests using Netflix's 50-week moving average as a trading tool. It's also why he is cautious on the name.
"It's elegant in its simplicity, but it works extremely well," Ross said of the 50-week average. "Going back to 2008, it put you in the stock on the cross above it and took you out of the stock on a cross below it. Just recently, we crossed below it. Now, we have reclaimed it, but we did get that cross, which tells me it generated that little sell signal."
The key support for Netflix's stock is the $300 level, Ross said.
"A break back below the 50-week – back below $300 – that's a strong sell signal," Ross added. "I think you have to avoid the stock here. I would sell into strength here."
To see the full discussion on Netflix, with Sanchez on the fundamentals and Ross on the technicals, watch the above video.
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