Yahoo Finanza Netflix Grinding Out Long-Term Top
Netflix Inc. (NFLX) reports Q4 2021 results after Thursday’s closing bell, with market watchers expecting the streaming service to post a profit of $0.82 per-share on $7.71 billion in revenue. If met, earnings-per-share (EPS) will mark a 31% decline compared to the same quarter last year, when social distancing underpinned subscriber growth. The stock fell 1% after warning about Q4 results in October but recovered quickly, posting an all-time high about one month later.
Hit or Miss Entertainment Pipeline
Analysts are worried that creative execution remains ‘predictably erratic”, compounded by the high volume of new releases. Sadly, for every “Squid Game” mega-hit, Netflix has produced a treasure-trove of unwatchable garbage like the quickly cancelled “Cowboy Bebop”. In addition, expensive one-off releases that include the poorly-reviewed ‘Red Notice’ have attracted a generous number of eyeballs but are showing little power to stoke slumping subscription rates.
The Benchmark Company analyst Matthew Harrigan reiterated his ‘Sell’ rating recently, warning that price increases could adversely impact bottom line growth, As he notes, “Valuation is vulnerable to inflationary expectations, given limited immediate free cash flow and possible consumer recalcitrance in tolerating price increases. All else equal, an increase in anchored inflation expectations to 4% from 2% … would lower our fair 2022 NFLX valuation to $390.”
Wall Street and Technical Outlook
Wall Street consensus now stands at a ‘Moderate Buy’ rating based upon 26 ‘Buy’, 7 ‘Overweight’, 10 ‘Hold’, 1 ‘Underweight’, and 3 ‘Sell’ recommendations. Price targets currently range from a low of $342 to a Street-high $800 while the stock is set to open Thursday’s session about $180 below the median $700 target. This poor placement highlights Main Street apathy due to high valuation, slowing subscription growth, and the broad rotation out of growth plays.
Netflix broke out above 2018 resistance at 425 in April 2020 and entered a powerful uptrend that topped out below 600 in July. That resistance level held into a September 2021 advance that ended just above 700 in November. Price action since that time has been dismal, yielding a failed breakout and persistent downdraft that’s quickly approaching broad support near the July 2020 low. The 18 month return to investors has now dropped to zero, consistent with a long-term top.
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Disclosure: the author held no positions in aforementioned securities at the time of publication.
This article was originally posted on FX Empire
