Back to top

Here's Why Netflix (NFLX) Stock Climbed Back Today

Read MoreHide Full Article

Shares of Netflix (NFLX - Free Report) sunk 6.5% on Monday as part of a broader technology selloff. But it didn’t take long for the streaming giant’s stock to bounce back after its worst day of trading in some time, with shares up over 3% through early morning trading Tuesday.

Netflix stock suffered its biggest one-day drop since July 2016 on the back of heightened trade war tensions between not only the U.S. and China but the European Union as well. The pull-back also hit the likes of likes of Twitter (TWTR - Free Report) and chipmakers Micron (MU - Free Report) and Nvidia (NVDA - Free Report) .

Meanwhile, investors should note that Netflix fired its chief communications officer at the end of last week. CEO Reed Hastings said that he fired Jonathan Friedland after he used a racial slur at work on multiple occasions. Friedland has since apologized publicly, but investors might see this storyline appear in at least some capacity for the time being.

Bounce Back

Netflix’s downturn was very short-lived and it seems many investors might have simply taken advantage of Monday’s non-fundamentally based selloff to buy NFLX stock at a bit of a discount. And the brief downturn was barely even a blip on the radar, with shares of Netflix up roughly 107% since the start of the year coming into Tuesday, against the S&P 500’s 1.9% climb.

The streaming company also received yet another positive analyst upgrade. Imperial Capital initiated coverage of NFLX with an “outperform” rating and set its price target at $503 per share—representing a nearly 31% upside from Monday’s closing price. “In our view, the greatest competitive advantage Netflix has as it seeks to grow subscribers from current levels in its pricing structure and the value the consumer receives for that structure," analyst David Miller wrote in a note to clients.

Imperial Capital’s upbeat coverage follows two major Netflix upgrades. Last week, GBH Insights raised its NFLX price target from $400 per share to $500. At the time, GBH’s updated price target marked the highest out of the 36 analysts who cover Netflix, according to FactSet. GBH’s upgrade also came less than a week after Goldman Sachs (GS - Free Report) lifted its NFLX price target from $390 to $490, which means clearly a broader selloff shouldn’t worry Netflix investors too much considering its current growth projections and strong game plan to compete against Amazon (AMZN - Free Report) , Hulu, and soon enough Disney (DIS - Free Report) , have sparked massive upgrades.

Quick Fundamentals

Netflix added 7.41 million new members in the first quarter, which marked a 50% jump from the year-ago period and topped the company’s forecast of 6.35 million. The streaming company closed the quarter with 125 million members. Looking forward to the second quarter, Netflix expects to add 6.2 million new members.

Meanwhile, our current Zacks Consensus Estimates are calling for Netflix’s Q2 revenues to surge by 41.29% to reach $3.94 billion. The company’s full-year revenues are expected to climb by 38% to touch $16.13 billion.

At the other end of the income statement, Netflix’s adjusted Q2 earnings are projected to skyrocket from $0.15 per share in the prior-year period to $0.80 per share. For the full-year, the company’s earnings are expected to climb by 130% to touch $2.88 per share.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.

Click here for the 6 trades >>

More from Zacks Stocks in the News

You May Like