Why You Should Not Subscribe to the Netflix Stock Fears – Investorplace.com

For some on Wall Street, earnings in Netflix (NASDAQ:NFLX) played out like a scary movie. But should investors be running for the exits? Lets take a look at whats happening off and on the price chart in Netflix stock to allow for a stronger risk-adjusted determination on shares.

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Tuesday nights quarterly release for NFLX stock wasnt a blockbuster, which resembled nothing like the subscription video on demand (SVOD) giants growth era over the last decade. Worse though, much of Wall Streets post-earnings optics targeted the reports negatives. Topping the list of warnings were the companys weak guidance and slower-than-expected subscriber growth in Netflixs North American market.

The combination stoked fears competition in the streaming market from the likes of Disney (NYSE:DIS), Apple (NASDAQ:AAPL) or Amazon (NASDAQ:AMZN) and imminent threats from AT&T (NYSE:T) and Comcast (NASDAQ:CMCSA) are the real deal. The concerns helped Netflix shares fall around 4% in the reports immediate aftermath Wednesday. However, those worries also fail to tell the whole story in Netflix stock.

Despite the roll-out of Disney+ and Apple TV+ during the companys reported fourth quarter, Netflix did manage to top Street profit and sales forecasts. Furthermore and possibly more importantly cash burn peaked in 2019, and management sees the company on the glide path, slowly, towards positive free cash flow.

Additionally, Global growth continues to deliver for Netflix shareholders. International paid subscriber additions of 8.33 million compared to forecasts of just 7.17 million. And, as analysts at AB Bernstein noted, thats where the companys total addressable market (TAM) and future growth lies. Furthermore, key markets such as India looking increasingly exciting for Netflix.

Lastly, and a word of warning to Wednesdays bears, viewer discretion is advised on the accompanying NFLX price chart.

Bears may have won Wednesdays battle. But the big picture continues to hint at higher prices in 2020 for Netflix stock. The weekly chart included here shows NFLX shares have put together a nice bullish trend, with a series of higher-highs and higher-lows. The price action follows a higher-low, double-bottom pivot hammered out this past fall inside a large corrective base nearly two years in the making. Collectively, theres solid evidence to remain optimistic on Netflix stock.

To be fair and more importantly, smart the pattern isnt a free ride for investors to simply buy into. For one, stochastics are overbought. Also, price patterns are fluid and conditions could always turn for the worse. If pattern and Fibonacci resistance near $350 arent cleared, a more threatening lower-high formation would have us questioning NFLX stock.

Overall, I see any potential resistance as an obstacle which will be cleared in the days ahead. And any fears the writing is on the wall for Netflix stock would only occur if shares fell below $317. Thats enough to nix a still-building hammer candlestick on the weekly chart, fail uptrend channel support and sufficient evidence to pull the plug.

Investment accounts under Christopher Tylers management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tylers observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies and related musings, follow Chris on Twitter @Options_CAT and StockTwits.

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Why You Should Not Subscribe to the Netflix Stock Fears - Investorplace.com

Reviewed and Recommended by Erik Baquero