Netflix Stock Price Prediction July 2021 – Time to Buy NFLX?

Netflix (NFLX) stock rose 1.3% yesterday and was trading higher today in pre-market following reports the company is considering a foray into video games.

Netflix stock only rose around 5% in 2021 and is the worst performing FAANG stock of the year. It is currently down 7.7% from its 52-week highs, even as the tech-rich Nasdaq index is near record highs. What is the forecast for NFLX stock and will it recover?

Technical analysis of Netflix stocks

Netflix looks bullish on the charts. It has exceeded the 10-day, 30-day, 50-day, 100-day, and 200-day SMAs (simple moving average). The stock was facing strong resistance near the 200-day SMA, but has now convincingly exceeded the level. The 12.26 MACD (moving average convergence divergence) also gives a buy indicator. However, NFLX stock entered overbought territory with a 14-day RSI (Relative Strength Index) of 70.06. RSI values ​​above 70 signal overbought levels while values ​​below 30 signal oversold positions.

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Latest NFLX Action News

Netflix hired Mike Verdu who has previously worked with companies like Electronic Arts and Facebook. Verdu will join as vice president of game development and report to COO Greg Peters. The company would like to offer video games on its platform. NFLX may not charge additional fees for service on departure.

This move makes sense for Netflix given the growing competition in its primary streaming industry. Companies like Disney are making great strides in the streaming industry, and the collections of their recent hit “Black Widow” on the streaming platform look encouraging. Disney inventories had risen while inventories at movie chains like AMC Entertainment fell after reporting collections.

While watching Netflix, the news of its aggression on the video game industry sparked a massive sell-off in GameStop. The stock has been a Reddit favorite and is up sharply in 2021, although most analysts are bearish on the games retailer.

NFLX enters video games

Netflix charges higher fees than its streaming counterparts like Disney and Amazon Prime and is expected to raise its gaming standards to beat the competition. It had 207.68 million paying subscribers worldwide at the end of March. The company is expected to release its second quarter results next week and provide more updates on its foray into video games.

Bloomberg Intelligence Analyst Geetha ranganathan sees Netflix moving into video games as a wise move. “This is a natural extension of Netflix’s content strategy, allowing it to exploit the intellectual property of popular shows such as ‘Stranger Things’. While this doesn’t generate much additional revenue, it will help deepen engagement and increase the attractiveness and pricing power of the service. Don’t expect this to be a turning point, but it shows that the company will explore new formats to increase the time spent on the platform, ”she said in her memo.

Netflix stock forecast

Meanwhile, Wall Street analysts are bullish on Netflix stock and its median target price of $ 618.50 implies a 12.8% rise from current prices. Its lowest target price is $ 342, which is over 37% off, while the highest target price of $ 1,154 is a 110.5% premium over current prices.

Of 44 analysts polled by CNN Business, 34 rate NFLX stock as a buy while six see it as an expectation. Four analysts have a sell or equivalent rating on the stock.

netflix share valuation

NFLX Stock Analyst Ratings

Last month, Edward Jones launched a hedge on NFLX stock with a sustaining rating while Credit Suisse downgraded the stock from neutral to outperforming and assigned a target price of $ 586. Wells Fargo also reiterated its overweight rating and its target price of $ 700 on the stock.

“We are seeing NFLX move from Growth to GARP as the stock loses its past net addition and reappears as a profit growth company. We believe the bottom line is becoming stable enough that the company can even provide longer-term EPS growth forecasts, ”Wells Fargo said in its Release.

Notably, the subscriber growth figures for Netflix have fallen from the highs we saw in the first half of 2020. However, the company now expects to become cash flow neutral in 2021 and then to show sustainable positive free cash flow thereafter.

Jefferies is bullish on Netflix stock

Jeffries also reiterated his buy rating and assigned a target price of $ 620 last month. “Besides what the company is currently doing (choose your own adventure shows + licensing for casual mobile games), we take a brief look at the three strategies we think any media company should be thinking about. While we would love to see Netflix use its cash flow to create a video game streaming division, we believe the company will remain focused on its core competencies, ”the brokerage said in its statement.

NFLX action looks appealing

NFLX stock is trading at an NTM PE multiple (over the next 12 months) of 53.1x, which is well below the historical average. The decline in multiples is understandable as growth rates are also falling and Netflix is ​​becoming a mature business. The company’s revenue growth was 27.6% in 2019 and fell to 24% last year. Analysts expect revenue growth to fall to 18.9% in 2021 and 15.1% in 2022.

However, the company’s profit growth is expected to outpace revenue growth as previous investments are now starting to pay off. New verticals like video games will help increase the rigidity of the platform and could be a revenue opportunity in the future.

While there is a threat from other streaming companies, shares in Netflix now seem like a good buy. It underperformed its FAANG peers in 2021 but is expected to rebound in the second half of 2021.

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