The Oscars are arriving in about a month. Many analysts will use this as an opportunity to make an "educated" forecast as to how it will affect Netflix (NASDAQ:NFLX). Award shows really have no impact on the business itself, but do they create opportunities?
Let's look at the Oscar's effect on the stock price of Netflix. I have done a five-year look back and have listed them in the table below. There are a few things you need to know about the table. Because the Oscars fall on Sundays, the "Day Before" column represents Friday before the event and the "Day After" column represents the Monday after the event. The Weeks column represent the business weeks (Monday through Friday) so the same logic applies. The percentage changes in the column represent the percentage change in share price one would experience if one bought the stock at the open of the day or week and held it through the close of the day or week.
I did not bother to go one month out as these types of anomalies begin to reveal themselves closer to the event date.
Interestingly, for the past five years, there was some predictability on NFLX's stock price movement on the day before the Oscars. Four out of the five years the stock dropped in value. Last year, the stock remained basically flat. You could take advantage of this information and try to ink out a quick profit by short selling the stock, but why fight the overall trend. It is better to avoid short-term trading of this short-term fluctuation and stay with the rising trend.
From a weekly perspective, the week before the Oscars shows that four out five years were negative. Due to the magnitude, it would be very wise for you to avoid this event altogether and not try to add to your NFLX position at the beginning of the week as well.
Although the "Day After" column does show that 60% of the time NFLX closes negative, there does not appear to be any reliable consistency. Every other year it is either positive or negative. Thus, there is no reliable consistency to determine when you might buy at an unfavorable price. The "Week After" column also shows a 60% positive price change, but there is no clear tendency, which is why I would recommend not purchasing the stock after the Oscars as well.
In addition to the Oscars, many analysts believe that the Golden Globes have an impact on NFLX. While history does show that this event also does not matter in the grand scheme of things for NFLX's long-term outlook, could this event be used as an opportunity to add to your long-term NFLX position as well?
The chart below highlights 2011-2015. Although the Golden Globes have already occurred, would we have been able to glean any information from the data to make a decision for the 2016 event?
Although data shows that there is a 60% chance for NFLX to rise the day before the Golden Globes, the yearly tendency seems to have shifted from a positive reaction to a negative reaction. This to me indicates that the stock may be sensitive to the Golden Globes sentiment at the given time and one may need to be aware of what Hollywood may be thinking in terms of nominations and predictions.
For the 2016 event, there was a negative price change one day before the event, while the week before the event had a positive price change which confirms the conflicting information the previous table provided. There was no reason to add your NFLX position.
What is interesting about the Golden Globes and the Oscars is that both award shows do not have any predictability post event. If you want to add to your position in NFLX, it appears that neither the Oscars nor the Golden Globes will give you that opportunity. The Oscars historically show a price drop, while the Golden Globes have recently shown no clear-cut indication of how the stock may react pre-event. Thus, we have two different results reaching the same conclusion - it is best to sit these two events out.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.