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Netflix Faces Short-Term Challenges Amidst Downward Trend and Content Issues

StockInvest.us, 2 months ago

Netflix Company Overview

Netflix, Inc. (NFLX) is an over-the-counter stock listed on the NASDAQ. As of the last close on September 22, 2023, the company had a market capitalization of $168.31 billion and over 443.15 million shares outstanding. The company's earnings per share (EPS) for the period stood at $9.19 with a price-to-earning (PE) ratio of 41.33, which suggests that the company's stock price is somewhat high compared to its earnings.

Price Performance

Netflix saw a decrease of -1.13% in stock price during the last trading day, closing at $379.81, down $4.34, with a high of $386.88 and a low of $378.41 for the day. Over the past year, the stock has performed with a high of $485 and a low of $211.73. The volume of 3.63 million was lower than the average volume of 6.21 million shares. This may indicate that there is currently less interest in the stock than average.

Technical Indicators

The current Relative Strength Index (RSI14) of 15 indicates that the stock is oversold. This could indicate a buying opportunity for investors since the stock might be underpriced. However, the 50-day moving average ($426.81) is higher than the 200-day moving average ($367.45), indicating a downward trend in the stock's price. The Moving Average Convergence Divergence (MACD) for the past three months is quite low at 3.60 showing a weak positive momentum.

Analyst Ratings and Forecasts

Netflix The consensus among analysts is that NFLX is a Buy, with 1 strong buy recommendation, 19 buy recommendations, 16 hold recommendations, and only three sell recommendations. The high price target among them stands at $735, with a low price target of $151, giving a median target of $315 which is lower than the discounted cash flow (DCF) estimate of $391.22. This shows a split in opinion between the target consensus and DCF valuation.

Recent News and Future Prospects

News related to the company suggest that Netflix might face near-term issues with advertising and content. Analysts at Oppenheimer have recently reduced their price target for Netflix to $470 from $515, due to comments from the company's CFO. Netflix is also ending its DVD subscription service this month, marking a significant shift in its business model. Meanwhile, the ongoing strikes in Hollywood, if not resolved soon, could negatively affect the company's content production pipeline.

Considering these developments, in the short term, the company may experience pressures related to content production and service modifications.

Prediction and Recommendation

Based on the overall analysis, while Netflix shows considerable potential in the long term, the technical indicators suggest a downward trend and recent events may pose short-term challenges. For the next trading day (September 25, 2023), it is likely the price will hover around the last close price between the low and high of the last trading day due to current market sentiment. The upcoming week could see a continuation of the downward trend unless positive news emerges to allay concerns regarding content and service changes as well as advertising challenges.

Taking every factor into account, while caution is advised due to short-term headwinds, the company is fundamentally strong. NFLX can be categorized as a 'Hold' for those who currently own the shares and as a 'Buy' for investors looking for long-term growth opportunities, given the low RSI and analysts' consensus. However, it's important for investors to continue keeping an eye on company reports and industry trends.

Check full Netflix forecast and analysis here.