Shares of Netflix NFLX went up roughly 3% on Monday after William Blair analyst Ralph Schackart reiterated his bullish sentiment about Netflix shares to go up 22% by the end of the fiscal year. The upward tick in the company’s stock came as a needed boost, as the stock has been somewhat stagnant. The stock is up 31% since January but the majority of those gains took place within the first couple weeks of the year. The stock hasn’t really made a move in either direction since early 2019. According to research firm Bespoke, this recent stagnant trend for the stock is its tightest trading range on record. This can indicate that the stock is bound for a big move, in either direction.
Some analysts believe Netflix is headed for a long-term uptrend. Fairlead Strategies’ Katie Stockton believes the stock is headed in an upward direction. Netflix is currently trading above its 200-day moving average, which is another key indicator that shows a stock’s trajectory. This recent boost in the streaming giant’s shares is what has Stockton believing in a long-term upward shift for Netflix.
But before the stock can begin any upward movement, the company needs some sort of a breakthrough. Stockton believes that if the company can surpass $387/share, which is about an 11% increase from Monday’s closing price, then the stock can begin its uphill journey. As a result, shares are in a sort of proving ground at the moment, as it is oversold despite underperforming.
Netflix is currently sitting at a Zacks Rank #3 (Hold). The stock is definitely dealing with hyper valuation, as it is currently being traded at 104X its forward earnings and has a PEG ratio of 3.49. Its price/sales ratio of 9.23 further confirms the stock’s high valuation. While the stock certainly faces valuation issues, Netflix has some projected gains in terms of growth. According to Zacks Estimates, the company currently has a projected EPS growth of 24.63% and a projected sales growth of 27.78% for the current fiscal year. Both estimates are well above the industry averages, putting Netflix ahead of the pack. These growth projections are in line with the analysts’ predictions, but the catalyst that can set off this potential growth still remains to be seen.
While investors will have to pay for the growth potential now, NFLX’s positive growth indicators might be enough to transcend the price. In addition, Netflix has also been performing relatively well in comparison to the rest of its FAANG counterparts, just slightly behind Facebook FB; shares of the social media giant have gained more than 40% year-to-date.
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