Interactive Investor

Is it really worth watching Netflix shares?

23rd June 2022 07:41

Alistair Strang from Trends and Targets

It's been a rollercoaster journey for Netflix, and independent analyst Alistair Strang has his own view on how the ride will end.

Once upon a time, we were all trapped in a world where we couldn’t go out, we couldn’t travel, forced to ‘enjoy’ the company of immediate family. But we were thankfully permitted to move our place of work to a kitchen table, a hurriedly built shelf in a bedroom, or wherever. During this period, share prices of companies catering for the change in society soared, while airline shares fell, hospitality shares fell, travel shares drove endlessly downward.

Now, with society returning to whatever passes as normal, it’s not unexpected to see online shopping companies getting a bit of a hammering, the shine coming off electronics companies, even the Peloton Interactive Inc (NASDAQ:PTON) share price running itself into the ground, and streaming companies such as Netflix Inc (NASDAQ:NFLX) discovering their growth in customer numbers was to prove a short lived phenomena. Quite why the company thinks an effective business model for the future is to alienate their remaining client base by increasing prices while reducing accessibility.

Netflix's share price has achieved a greater level of pain than we’d expected, the value now trading substantially below the Covid-19 low of 2020 ($290), the point from which it soared to $700. At time of writing, the share price is trading around $178 and we suspect this situation is destined to become worse.
Presently, below 162 looks capable of provoking reversal to an initial 118 with secondary, if broken, calculating at 102 and hopefully a bottom capable of producing a real bounce.

Past performance is not a guide to future performance.

We’ve a pretty good reason to hope 102 shall prove to enjoy trampoline qualities, thanks to a quite nasty risk if the 102 level breaks. Doing so would move the price into a region, where we calculate an absurd looking 19 as the “ultimate bottom” for the streaming service. We’re more than a little sceptical over this 19 target level as it would return the share price to a level not seen since 10 years ago.

Thankfully, with their business of making movies, Netflix perhaps shall prove capable of producing a happy ending for the current situation. Presently, the price needs to exceed 209 to give hope as this calculates with the potential of an initial 250 with secondary, if exceeded, a rather less confident looking 313.

Alistair Strang has led high-profile and "top secret" software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know "how it worked" with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.

Alistair Strang is a freelance contributor and not a direct employee of Interactive Investor. All correspondence is with Alistair Strang, who for these purposes is deemed a third-party supplier. Buying, selling and investing in shares is not without risk. Market and company movement will affect your performance and you may get back less than you invest. Neither Alistair Strang or Interactive Investor will be responsible for any losses that may be incurred as a result of following a trading idea. 

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