Is investing in Netflix now a good idea?

on Oct 17, 2022
  • Netflix stock rose 6% on Monday.
  • The stock is gaining momentum after a series of upgrades.
  • Netflix remains robust but has to overcome the $249 resistance.

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Netflix, Inc. (NASDAQ:NFLX) opened the week 6% higher on Monday. The gains underlined optimism around the company’s turnaround ahead of the earnings report. The company reports earnings on October 18 after the market’s close. Investors are warming up for $2.11 per share in the quarter, compared to $3.19 per share last year. But expectations are rising.

Netflix is seeking to revamp its subscription revenue to arrest dwindling fortunes. Last week, the streaming giant announced a new ad-supported subscription in the US. The ad kicks off on November 3 for $6.99 a month. The turnaround will also see the company launch a “basic with ads” package in 12 countries, with plans for more.

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Analysts have been taking note of the positive developments. Morgan Stanley has hailed the ad support as a major opportunity for Netflix. In response to the announcement, the strategists reiterated Netflix with an equal-weight rating. The analysts gave a $230 price target, indicating a likely increase in revenue per user for the streaming giant.

Morgan Stanely is not the only analyst to laud Netflix. As Invezz reported, Oppenheimer thinks it is now a good time to get back into Netflix. The analysts were also banking on the ad-supported tier even before the news was confirmed. Oppenheimer has a $325 price target, an upside potential of 32.6% from the current $245. We think the stock could be tilting to the upside based on the technical indicators.

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Netflix meets resistance at $249 amid building momentum

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Source – TradingView

Technically, Netflix has tested the $249 level severally in a strong indicator that buyers are coming back. The MACD indicator is initiating a bullish crossover, but it has not been confirmed yet. The indicator has also entered bullish territory as more buyers enter the stock.

How attractive is Netflix

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The market outlook for Netflix stock is improving based on key developments and upgrades. The increasing momentum and stock stability between $220-$249 suggest a likely breakout above the resistance.

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Nonetheless, the stock needs to clear $249 before we issue a bull call. Potentially, the upcoming earnings report would be a catalyst for a break out if expectations are met/exceeded.

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