Netflix Shareholders Are Stuck in the ‘Upside Down’ — But Another Reality Reveals the Buy of a Lifetime

[TradeSmith Daily]( Netflix Shareholders Are Stuck in the ‘Upside Down’ — But Another Reality Reveals the Buy of a Lifetime My friend and colleague TradeSmith CEO Keith Kaplan is a huge fan of “Stranger Things,” the wildly popular Netflix Inc. (NFLX) series about a group of kids who discover a supernatural secret hidden in their small town of Hawkins, Indiana. It’s called the “Upside Down” world, and I have to say that ever since I heard about it, I’ve been captivated. The “Upside Down” is an alternate dimension that exists alongside the characters’ “real world.” Devoid of human life and positive emotions, and with monsters lurking around every corner, it’s somewhere you want to leave as quickly as possible. But even though you want to leave and didn’t ask to be there, you can get stuck. A mental lightbulb started to spark… and I realized that this is the perfect analogy for Netflix. Right now, Netflix is stuck in the “Upside Down” world. It’s an unpleasant reality that shareholders are trapped in, especially those who may still be holding on to shares they bought for $700. For anyone who wants to invest but hasn’t — no one wants to try to catch a falling knife, as the stock could keep sliding. Here a quick look at Netflix’s unpleasant reality: - The Netflix stock price has plummeted 63% this year. - It lost 200,000 users in its last quarter. - Password sharing could be leading to an estimated 45% of all Netflix watchers using the platform for free. - And there could be more people canceling their Netflix subscription than signing up for one in the near term. But if you can look past the “Upside Down” world, you’ll see that another reality exists at the same time — and it’s that Netflix is the buy of a lifetime. Yes. Even trapped in a negative reality, there are plenty of reasons to still like this company. In 2021, for the first time in the company’s history, Netflix won more Emmys (44) than any other network. That’s a huge validation for excellence in the television industry. It had six of the 10 most searched for shows in 2021. And Netflix still has the largest number of monthly active users in the U.S. To put it simply, this is a giant that won’t be dethroned easily. On the technical side, there are signals telling me this stock is going to be one you can eventually brag to your grandkids about owning. Now, when I say that, I’m not telling you to open up your brokerage account as fast as possible and hit the “buy” button on NFLX. Within our system, I want to see Netflix stock hit a few key indicators before sending any hard-earned money its way. But I do want to share the signals that have formed, and what I’m waiting to be triggered to act on the buy of a lifetime. RECOMMENDED LINK [Free Pick From the Man Who Called Bitcoin in 2014: “Buy This Crypto Today!”]( This multimillionaire crypto analyst picked Cardano before it jumped as much as 3,344%... Bitcoin in 2014 before it jumped as much as 18,596%… And Ethereum in 2016 before it soared as high as 62,112%. And now he's saying this $2 coin is at the forefront of a new $30 trillion crypto opportunity… [Click here and get all the details]( NFLX Flexes Its Pricing Strength Let’s start with pricing power, a measurement of how changing the price of a product affects demand. For example, if a streaming service hikes its prices and subscribers leave the service, signaling less demand for the product, the pricing power is weak. Netflix has an enviable relationship with its subscribers, having successfully raised prices six times in the past eight years with no appreciable detriment to earnings. Netflix began raising prices in 2014 and still managed to swell its subscription base from 48 million to nearly 222 million today. Only in the first few months of 2022 did the company see a hit to its subscriber count, reporting a loss of 200,000 account holders. Estimates up to 10 times that number are projected for the current quarter. Netflix management quickly asserted they didn’t believe the price hikes were responsible for the dip in subscriber count, pointing to the war in Ukraine, macroeconomic issues in Latin America, seasonality, and even heightened competition as the culprits. Scarcity of resources is a strong driver of pricing power. Only recently has Netflix had to contend with any serious competition. Netflix CEO Reed Hastings acknowledged the potential threat, doubling down on popular original programming, like “Stranger Things” and “Bridgerton,” to squelch rivals. Netflix still boasts a lower rate of subscriber loss (about 2.4% monthly) than any of its rivals, including Disney+, Paramount+, and HBO Max. Short Sellers Take a Pass Short selling occurs when a trader sells shares of a company they don’t own, hoping the stock price falls. If the price does fall, the traders make money. If it rises, they lose. There is something called “short interest,” which is the number of shares that have been sold short but have not been closed out or covered. It’s helpful to track the short interest of a stock because it indicates whether investor or market sentiment about the company is bullish or bearish. If the short interest is high, meaning more investors are betting on the stock to fail, that is a bearish signal. However, if short interest is low, that indicates a bullish inclination. In the case of Netflix, the stock’s short interest has actually fallen by 8% since its last report. In fact, its total short interest only represents about 1.61% of all outstanding shares available for trading, or its public float. It can be helpful to compare a company’s short interest percentage with that of its competitors. In Netflix’s peer group, the average short interest percentage of public float is 6.02% — which is more than three and a half times that of Netflix. As promising as these first two signals are, this next one proves I’m not alone in my favorable long-term outlook… Analysts Line Up Benzinga reported that 30 analysts determined that NFLX’s average price target should be $328.63. With the stock currently hovering around $170, this is a very bullish projection. While the price target has been adjusted down from $488, the current target is still well over the current price. RECOMMENDED LINK [#1 EV Stock to buy today [get its name and ticker free]]( The EV market is growing faster than crypto, AI, and cloud computing combined. BBC calls it "the biggest revolution in motoring since 1913." Wall Street legend Enrique Abeyta reveals his #1 EV stock (not Tesla) [right here](. Not So Fast Taking these three factors into account, we have a lot of reasons to get excited about Netflix right now. Its price is the most attractive it’s been, relatively speaking, in a long while. And that’s where the tiniest concern sneaks in. You see, there’s another important metric that isn’t doing so well: subscriber count. And despite what Hastings and the gang at Netflix say about it, missing their subscriber target is a big deal. Next month, around July 19 (these dates can always change), Netflix will release its earnings for the second quarter of the year. It’s already anticipated that the company will lose up to two million more subscribers. But what if it loses even more than that? Also, what will Netflix’s guidance reveal about Q3? Will the company keep losing subscribers? When does it expect the loss to end? I will be waiting to see what happens with Netflix’s subscriber counts before making any definite decisions about backing this company. I’ll also watch the signals within the TradeSmith Finance platform closely. If the price begins rising, a full VQ’s worth of positive movement could trigger an Entry Signal. Right now, NFLX is in the Red Zone, has been in a downtrend for more than two months, and has a VQ of 33.27%, making it a high-risk stock. As much as I’m convinced this overly beaten-down tech stock is the buy of a lifetime, I also wouldn’t make a move until our tools tell us it’s time to buy. But I’d like to know what you think about beaten-down tech stocks, like Netflix, during a time like this. [Email me your thoughts](mailto:keith@tradesmithdaily.com). Good investing, Mike Burnick Senior Analyst, TradeSmith P.S. While you wait for Netflix to hit the “buy list,” you don’t have to sit around and wait to generate instant cash. There’s a trade you can do in as little as 60 seconds that I want to share with you today. Again, you don’t have to sit around and wait for something to make you money. You’re paid in advance. [Click here]( to see how this investing novice pocketed $920 in just 47 seconds. P.P.S. You’re invited to join our Product Education Lead, Marina Stroud, for her free Intermediate Bootcamp training session. In today’s webinar, Marina will review the Timing RSI Rebounds strategy and our newest strategy, Trade Wave. The Timing RSI Rebounds approach combines our Peaks & Valleys indicator with the Relative Strength Index (RSI) to identify investment opportunities. Trade Wave analyzes amplitude bands to determine how prices can move up or down for a particular cycle. These amplitude bands can also help provide a high probability of profit (POP) for long call options by suggesting exits within our “Max Gain Date Range.” Marina will explore the criteria for each of these strategies. This lesson discusses features that are available to Timing by TradeSmith and TradeSmith Platinum members. However, all are welcome to attend. [Click here to register]( for today’s webinar. The webinar will begin at 1 p.m. Eastern and include time at the end for a question-and-answer session. Best of TradeSmith The chart below represents the best-performing open positions over the last two years, as recommended by our software. [Download now on the Apple Store]( [Get It On Google Play]( [866.385.2076](tel:+866-385-2076) | support@tradesmith.com ©TradeSmith, LLC. All Rights Reserved. You may not reproduce, modify, copy, sell, publish, distribute, display or otherwise use any portion of the content without the prior written consent of TradeSmith. TradeSmith is not registered as an investment adviser and operates under the publishers’ exemption of the Investment Advisers Act of 1940. The investments and strategies discussed in TradeSmith’s content do not constitute personalized investment advice. Any trading or investment decisions you take are in reliance on your own analysis and judgment and not in reliance on TradeSmith. There are risks inherent in investing and past investment performance is not indicative of future results. TradeSmith P.O. Box 3039 Spring Hill, FL 34611 [Terms of Use]( [Privacy Policy]( To unsubscribe or change your email preferences, please [click here](. [tradesmith logo]