Simplistic Technical Analysis for NFLX (November 8th 2014)

Last week, I had predicted that Netflix was going to go higher. More specifically I had predicted the following...

1. Netflix will rise to $400 by end of next week and continue to 410-415 for the week after.

2. Netflix may test $425 for the week after, but will revert to 410 or so within a 4 week period.

In hindsight these predictions did not turn out to be true for primarily two reasons.

1. As per my fundamental analysis, the stock was already trading near its intrinsic value of $390.

2. From a technical analysis, the bollinger band had contracted perhaps and the stock was touching the top.

This week again, we are again looking at the 6 month candlestick chart for Netflix on Yahoo stocks. The following indicators have been added to the chart.

1. Bollinger Bands at 20 days and 2 Standard deviation

2. 20, 50 and 200 day Simple Moving Averages

3. MACD indicator for 26, 12 and 9

4. 14 day Money Flow Index 

If we look at the charts this week, we can see that the stock has trended down after touching the top of the bollinger and has also reflected from the bottom by the end of the week (highlight 1). From a MFI perspective, the stock is not overbought as yet at 62 odd. MACD divergence (highlight 3) has marginally moved to positive territory, while MACD and signal are very much in oversold territory. Crossing the 20 day and 50 day SMA is a trigger for the stock to move higher and is liked by the bulls. So expect some upward tick if the stock crosses these thresholds.

Here are my short term amateur predictions for the week.

1. The stock will end the week at the upper Bollinger at 394. 

2. It will reverse to below 390 the week after and then get pushed to around 405-410 around three weeks from now.

These are amateur predictions so please do your own research. 

Simplistic technical analysis for NFLX (November 2nd 2014)

Last week saw NFLX climb back above $390 to at around $392.77 by the end of the week. In my previous post last week, I had mentioned that trends seem to indicate that Netflix was going to cross 390 at head towards 400 in 2 to 3 weeks.

That turned out to be true. Let us examine this week, what the trends seem to indicate.

To conduct my analysis, I am using the following indicators. We are looking at 6 month candlestick chart for Netflix on Yahoo stocks. I have added the following indicators to the chart.

1. Bollinger Bands at 20 days and 2 Standard deviation
2. 20, 50 and 200 day Simple Moving Averages
3. MACD indicator for 26, 12 and 9

I have also added a fourth indicator

4. 14 day Money Flow Index 

Based on last week, it is clear that $380 was a support level that needed to be tested. Once the stock tested that level on Thursday, it moved up. The growth trajectory seems similar to the rise in beginning of August that was a 3 week trend. Assuming a similar trend started October 16th when the stock bounced back from a poor earnings call, we can see that we are mid way of that trend. This implies by second week of November, we may be testing $415 or so.

Even looking at oversold, overbought indicators, MACD and MFI, we can see that stock still has room to grow from here. This may be tested at $400 and $410 levels for some profit taking since the valuation outlook has not changed substantially. My valuation of intrinsic value remains at $390 for Netflix.


Here are my short term amateur predictions

1. Netflix will rise to $400 by end of next week and continue to 410-415 for the week after.

2. Netflix may test $425 for the week after, but will revert to 410 or so within a 4 week period.

These are the predictions of an amateur so please make your own decisions based on individual analysis or professional advice.

Simplistic technical analysis for NFLX (October 26th 2014)

It's already more than 10 days since Netflix fell through the bottom after announcing its latest earnings. Last week based on fundamental analysis, I proposed an intrinsic price of $390 odd. The stock has moved rapidly towards its intrinsic price.

There is not much to analyze when looking at long term trends, and we can see that the stock is steadily rising. I had suggested in my last week's blog post that price would rise above 375 in next 4 weeks. It has already gone past that in 1 week, which implies bulls are seeing a long term potential for the stock above $400.

Also, when focused on last 10 days pricing, we can see that the stock has crossed the 4 and 6 day moving averages and is approaching the 8 day average, which I suspect it will cross the coming week.

Based on the above, my amateur predictions are that the stock will approach its intrinsic value of $390 this coming week. I do feel that for $390 price to be validated, a lot more news on the international side of the business needs to show up as positive, but purely based on momentum, we should see the price rise to around $400 to $405 in the next 2 to 3 weeks. We may see some short term profit taking at 400 as well, which seems to be the next logical resistance point.

Netflix Valuation (October 2014)

Netflix fell almost 27% as soon as the latest earnings were reported. It was assumed that NFLX would add to subscribers, but subscriber growth was under the expectations and so was EPS growth.

In this post, I will present my assessment of NFLX intrinsic value. Netflix's valuation is based on its growth in US and international subscribers, margins per subscription category as well as content costs for the different segments.

Trefis the online valuation team assessed NFLX valuation to be $315 prior to latest earnings release. You can see that the price is made up of $5.37B revenue and $5.15B in expenses for 2014.

1. Average fee per subscriber will rise from $7.61 (2014) to $8.78 (2021)

2. US Domestic Streaming Subscribers will rise from 39.6 million customers to 57 million in 2021

3. Average fee per subscribing international customer will rise from $$7.17 in 2014 to $ 8.31 in 2021

4. International subscribers will rise from 26.2 million to almost 100 million

5.  The other element where my assessment of Netflix's trajectory is different in terms of international contribution margin. I feel this will grow from 3% in 2014 to 42.5% which will bring it more in line with Domestic contribution margin.

6. Last element where my assessment is different from Trefis team is Technology R&D costs. I think as Netflix becomes more international, it will have opportunities to lower its Technology R&D costs by at least 0.5%.

7. Final analysis reveals a target of $390....

Ofcourse, the market is not factoring an international growth of similar proportions and it is unlikely that it will do so for a while...

Update October 26th: The stock price closed on Oct 24th at $385, which implies that the market has factored in a more rapid international market growth. We could see the stock cross its valuation of $390 in the coming week and perhaps north of $400 in first two weeks of November 2014.