Netflix: Growth at a High Price

| About: Netflix, Inc. (NFLX)
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Netflix (NASDAQ:NFLX) may be one of those stocks you'd like to acquire on the recent rebound. In the last month the stock had 10 new lows and was 17.32% off its recent high. This is a stock with double digit projections for increases in sales and earnings and that alone should put it on your watch lists.

The recent hourly price action has been swift:

(Click to enlarge)

Netflix, Inc. provides online movie rental subscription services in the United States. The company offers its subscribers access to a library of movie, television, and other filmed entertainment titles on DVD. Its members can get DVDs delivered to their homes and can instantly watch movies and TV episodes streamed to their TVs and PCs. As of December 31, 2009, Netflix served approximately 12 million subscribers. It also partners with consumer electronics companies to offer a range of devices that can instantly stream movies and TV episodes to members' TVs from Netflix. The company was founded in 1997 and is headquartered in Los Gatos, California. (Yahoo Finance profile)

Barchart technical indicators:

  • Barchart 56% overall technical sell signal is beginning to weaken
  • Trend Spotter sell signal is also weakening
  • The stock had 10 down days and was 17.32% off its recent high this last month
  • The Relative Strength Index is 38.85%
  • Recently the stock traded at 240.55 which is below its 50 day moving average of 265.69
  • Barchart computes a support level at 231.05 and the stock seems to be moving away from that point today

Fundamental factors:

  • This is a very widely recommended stock by Wall Street and 23 firm have this on their watch lists
  • Brokerage analysts have 5 strong buy, 8 buy, 12 hold and 8 under perform reports in place at this time
  • Sales are projected to increase by 52.20% this year, followed by 38.50% next year
  • Earnings estimates are very robust with a 58.40% increase for this year and another 48.20% next year. The 5 year annual earnings forecast is for an increase of 31.38% annually.
  • At the present time the company increased its subscriber base by 18% during the first half of the year
  • Competitors are Hulu Plus, Amazon Prime (NASDAQ:AMZN) and Dish Networks (NASDAQ:DISH).

General investor sentiment:

  • This is one of the most widely followed stocks on Motley Fool
  • The 9,081 readers expressing an opinion voted 78% that the stock will beat the market
  • The more experienced All Stars vote a more aggressive 91% for the same result

Summary: Although the projections for Netflix sales and earning increases are double digit the high P/E ratio means that you are buying growth at a pretty healthy premium. If in the next few day the stock takes a dip you might want to acquire a few shares but I wouldn't take this a major purchase, a price under 237.50 might be OK.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.