Netflix is back in the IBD 50, after the stock topped an early buy point. But Netflix stock, today's pick for IBD 50 Stocks to Watch, faces a big hurdle.
The stock Wednesday climbed back above the 50-day moving average and has been forming a cup base since it peaked in mid-July. The 50-day line coincides with a trendline touching the highs since that peak, giving the stock an early entry around 651. The relative strength line is near highs, a positive indication.
Netflix stock has already climbed more than 160% from an initial breakout in October 2022, forming multiple bases along that advance. The current base is late stage, which means it will be difficult for shares to make further gains.
Already, the stock has shown that its long-term advance is getting stretched. In May, the stock broke out of another late-stage base. Shares climbed as much as 9% before ceding all gains from a 639 buy point and rolling over into the current chart pattern.
Notably, that top came nearly at the same level as Netflix's all-time high of 700.99 in November 2021.
Netflix Stock Fundamentals Strong
The video streaming company's fundamentals, however, could be enough to give the stock another push.
Earnings climbed 83% and 48% the past two quarters, and analysts expect EPS growth of 36% and 84% the next two reports, according to IBD MarketSurge. Sales growth accelerated from 8% to 12%, 15% and 17% the past four quarters.
Profit estimates for the full year and next year have been going up. That bullish outlook from Wall Street is reflected in the amount of buying major investors have been making: The number of funds holding Netflix stock went from 3,851 at the end of 2023 to 4,059 in June, according to MarketSurge.
Those massive holdings could be enough to keep Netflix stock rising for a while longer.
The company — which got its start renting DVDs by mail — is branching out into more live sports. It signed a deal with the National Football League to broadcast Christmas games over the next three seasons.
