Netflix has soared 50% since Christmas. Here's what Wall Street is saying about the stock

Netflix CEO Reed Hastings. Picture: Getty Images
  • Netflix is expected to report quarterly earnings after the bell on Thursday. Wall Street weighed in on how shares of the streaming platform look now.
  • The stock is expected to move 8% in either direction on earnings, according to Susquehanna, which is roughly in line with its behaviour in recent quarters.
  • Netflix shares have jumped 35% so far this year.Watch Netflix trade live here.

Netflix shareholders were gearing up on Thursday to hear how the streaming giant fared in the fourth quarter. Ahead of the results, Wall Street was expecting a relatively mild move for the stock – despite its outsized rally so far this year.

The options market is implying the stock will see a move of around 8% in either direction in response to its report, said Stacey Gilbert, head of derivative strategy at Susquehanna Financial Group. That’s in line with its average move over the past four quarters of about 7.4% in either direction.

“In short, the market is not pricing in additional risk this quarter relative to the previous year,” Gilbert told Business Insider on Thursday.

When asked whether she’s noticed a particular flow in the market that would suggest the stock is likely to move higher or lower on the results, Gilbert said she didn’t see a directional flow and that the stock was “surprisingly boring.”

She added: “Given the ~50% rally since the Christmas Eve sell-off and the recent price raising comments from the company, for investors who believe this quarter may be more risky than the ‘average’ quarter over the past year may find owning options attractive consistent with their directional view.”

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While the implied move appears to be nothing out of the ordinary, the recent rally has made the stock a bit stretched. Netflix is “overbought to put it mildly, but that was already the case a week ago – before Tuesday’s huge pop,” said Frank Cappelleri, chief market technician and senior equity sales trader at Instinet.

“As last year proved on various occasions, NFLX is comfortable STAYING overbought for extended periods of time,” he told Business Insider in an email on Thursday, adding the most recent rally is likely “not sustainable.”

A stock appearing “overbought,” or “extended,” typically means it’s risen in an extreme way – sometimes in a short period of time – which might make it particularly vulnerable to a drawdown. Netflix shares have soared 52% from their intraday low on December 26 – by comparison, the S&P 500 has climb roughly 11%.

“The stock is in a long-term uptrend, but the short-term picture is very stretched,” Cappelleri added. “This raises the odds of a mean reverting move happening some time in the near future.”

Netflix said earlier this week it would raise prices for US subscribers, an announcement that pushed shares higher by more than 5%. The decision to hike prices was a sign subscriber growth is strong, Bernstein analyst Todd Juenger told clients.

At this juncture, the stock is a buy, said Ari Wald, head of technical analysis at Oppenheimer. He pointed, specifically, to what he sees as investors’ appetite for high-growth names.

“In general, we expect a premium to be placed on high-growth companies in a low-growth world making stocks like NFLX prime candidates to lead the S&P 500’s secular advance over the coming years,” he told Business Insider in an email.

“Over the coming months, NFLX should get whipped around by what we expect to be additional price consolidation in the S&P 500 though we view the stock’s recent ability to rally above its 200-day moving average ($US332) as a sign of relative strength-such leadership traits is what we recommend owning based on our momentum discipline.”

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