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Asset Watch

Should you buy the dip in Netflix?

 

Thursday, July 27, 2023

Big Tech has been the S&P 500’s bellwether, as AI optimism and resilient growth have the sector doing much of the heavy lifting in 2023. And while companies like Tesla and Netflix sputtered post-earnings, Baird analysts upgraded the latter to outperform on Jul. 24 and increased their price target to $500. They wrote:
“Following the 2Q23 print, we think NFLX is entering a period of particular strength for the business, including: 1) significant revenue acceleration in 4Q23 and F24. 2) Continued annual operating margin expansion. 3) Significant and growing free cash flow. 4) Competitive advantages in the near-term as peers increasingly focus on profitability.”
Satori Fund manager Dan Niles tweeted on Jul. 24 that he bought Netflix, writing, “I love biz models w/ pricing power,” and the “5.9M sub adds still much higher than 2.1M expected.”

So, should you scoop up Netflix before the bullish sentiment returns?

On Jul. 25, the stock found support near its 10-week moving average. During most of the run from July 2022 to February 2023, Netflix also held above the key level and continued its uptrend. If it fails, next-level support is near $394, as it coincides with the February 2020 highs and the consolidation that took place from January to April 2022 before the next sell-off occurred. Unless a market-wide event unfolds, Netflix should stabilise in the weeks ahead.

Is the 10-week MA destined to hold, or will Netflix suffer a deeper correction?


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