How Long Will the Netflix Sell-off Last?
Throughout the pandemic lockdowns, home entertainment company Netflix held an enviable place in investors’ portfolios, making its epic fall from grace in the first quarter almost as dramatic as one of its blockbuster movies.
The hero share’s flaw is a drop in revenue because of lower subscriber numbers against the background of heavy competition from streaming services like Disney, Apple, Amazon and HBO, all of which are more established brands in the entertainment industry. On top of that, the lockdowns are hopefully over and people are spending less time at home and more time travelling or at work.
“After setting record highs on November 17 at $700.33 per share, this company loses 67.09%, with the decrease during this year 2022 being 62.45% compared to the increase last year 2021 of 11.41%,” said Admirals analyst Roberto Rojas.
Pandemic effect tails off
The pandemic-related upsurge in Netflix’s subscriber numbers tailed off in the first quarter and the number of subscribers came in at 221.6 million members versus the consensus of 224.5 million members. Netflix’s revenues have been hurt by households sharing passwords and accounts.
Source: MetaTrader 5 Netflix Share 5 Year Chart (Weekly). Captured 22 April, 2022.
“Technically speaking, the price is currently at levels not seen since 2018 at its important support level represented by the lower red band around $230 per share. It is very important that we pay attention to the price action around this support level because the loss of this support level could open the doors to a further pullback leading to the price looking for its next support levels in the 200 and 130 dollars per share,” said Roberto Rojas.
Netflix’s true performance
The outlook is not clear as investors continue to price in the company’s true performance. Netflix’s competitive strengths are in its creativity and popularity with viewers and the company’s content appeals to entertainment seekers worldwide.
How long can the sell-off go on? The downtrend may continue if it keeps dropping through support levels, commented Roberto Rojas. “These sharp declines have caused the loss of several important support levels, including the strong break below its 200-period moving average, and the crossover down of its averages, confirming break after break.”
Is a rebound possible? “If the share price does not manage to stay consistently above $330 per share, the sentiment will continue to be negative,” said Roberto Rojas.
In the long term, there could be a happy ending to the Netflix story. On the bright side, earnings per share beat expectations and Netflix’s CFO Neumann said the company expects to keep growing subscriber numbers and revenues for the full year 2022.
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