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Asset Watch

Should you keep an eye on Netflix?

 

Tuesday, December 12, 2022

While Netflix has plunged by more than 40% in 2022, the streaming giant is still the industry leader. Thanks to its ad-supported tier poised to draw in more price-conscious subscribers, investor sentiment could shift substantially in 2023.

 

Wells Fargo analyst Steven Cahall upgraded the stock from equal weight to overweight on Dec. 9 and raised his price target from $300 to $400. He wrote:

 

“The U.S. entertainment scatter [advertising] market is close to $10 billion annually and offers a low-hanging fruit to [Netflix], especially as cord-cutting increases.” He added, “content is clearly improving,” and “it’s tough to see [Netflix] not becoming a major player in U.S. TV advertising over the next 2-3 years.”

But even though the once high-flying growth stock has become more of a value play, should you snap up shares during the next pullback?

Netflix remains in an uptrend, as the stock has been making higher highs and higher lows since mid-October. However, the 20-day (black line) and 50-day (blue line) moving averages have largely acted as support since the summertime rally started, and the Dec. 9 candle shows that Netflix has run ahead of the 20-day MA.

Furthermore, the last three times this happened, Netflix suffered pullbacks, and two of the three resulted in the price falling below the 20-day MA. Therefore, while $275 (the 50-day MA) looks like an appetising entry, should you at least wait for $300 (the 20-day MA) before making your move?


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