Netflix stock is still a stock worth holding as it undergoes correction, trader Kathy Donnelly says.
"You've got the 10-week moving average that it still hasn't touched," Donnelly, investing coach and co-author of "The Lifecycle Trade" told Investor's Business Daily's "Investing with IBD" podcast. She says Netflix stock's recent bases illustrate a lot of the holding rules that she advises.
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Although Netflix stock remains below all-time highs hit earlier this month, the streaming giant's stock still stays above its 10-week moving average and is approaching 1000 — "a nice round number," Donnelly said. Milestone prices, while purely psychological, can often help a stock establish support.
Netflix stock saw upgrades from analysts over the week. Morgan Stanley keeping its overweight rating Wednesday, raising its price target to 1,050 from 830. Oppenheimer last weekend kept its outperform rating but raised its price target to 1,065 from 825. Loop Capital recently downgraded Netflix stock to hold but it raised its price target to 950, up from 800.
Netflix stock leads the Leisure Movies and Related group of stocks ranked as No. 1 according to IBD Research, and has a Composite Rating of 99.
Netflix Stock Milestone Raises Split Speculation
Netflix's march to 1000 is raising speculation of a potential stock split, which aims to bring down the cost of shares and make it more palatable for retail investors. Netflix has continued to drive growth by adding users from outside the U.S. and diversifying its subscriptions to include more ad-driven options. However, Netflix's average revenue per user, a key investor metric, remains largely stagnant.
Still, the streaming service retains a cult following with consumers through original properties like Stranger Things and the dystopian Squid Game series. Investors are hoping its cultural relevance will help boost margins without heavy increases in spending.
"It could be time for it to base a bit more," Donnelly says. She points to how Netflix stock has largely stayed above the 40-week moving average, with October 2023 being the lone exception. "That was an accumulation week," she said, discussing its quick recovery in 2023. "It was a week to get in if you were watching it closely and were interested in it." At that time, Netflix stock underwent a three-week consolidation according to MarketSurge pattern recognition.
Tap here to learn how to listen for sell signals with Kathy Donnelly, investing coach and co-author of "The Lifecycle Trade."
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