If the Financial Times is asking when NFLX is going to crash I thought I’d offer my two cents.
First the FT:
“Today, the numbers represent boundless optimism: a dozen times the $12bn of revenues reported last year, 120 times the profits it is expected to generate in this one.” Netflix has competition in Amazon, HBO, and Disney and they’re about to spend $8B, (against $6.5B in debt) on content for 2018. It’s a Dallas Stadium sized outlay, that you have to be skeptical about as a trader.
What they do best is the current valuation math: “If the average household were to pay $15 per month, up from $9.43 today, Netflix will need 305m paying households to get there.”
I’ve taken shots at NFLX before, but this setup is better. If you could zoom in, you would see the FIRST outside reversal day of any prior peak. NFLX gapped open at an all-time high of $333 (half of $666) and closed at $321.30. The range engulfed the previous days range and that’s often a difficult price to overcome, if not a sure interim peak.
Then consider that NFLX is currently 70% above its 200-day moving average, in yellow. The last time it was that far above its moving average in the last five years was when it made that first of two peaks that carved the 2015 top at $129. At that price it was 80% above its 200dma, and it tested the level twice. Then the NFLX fell 40% to $80, so place yer bets accordingly.
Do you watch Netflix because you can’t sleep, or can you not sleep because you are watching Netflix? THAT…is the question.