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Wednesday, April 17, 2024

Netflix leads Hollywood but lags the S&P 500, so buy the weakness, strategists say

Netflix may have stormed the Golden Globes, winning 10 awards and beating other streaming companies, but its share price has underwhelmed over the past six months.

The stock is slightly lower since September, trailing the S&P 500's 9% gain over the same stretch. The company had been one of Wall Street's darling early in the pandemic with its streaming content in high demand during lockdowns.

Michael Bapis, managing director at Vios Advisors at Rockefeller Capital, says Netflix investors should not sweat the pullback.

"Frankly, we think this little bit of a breather is healthy," Bapis told CNBC's "Trading Nation" on Monday. "They were one of the largest outperformers last year. Their subscriptions were up, 20+, 22% year over year in the fourth quarter. From a fundamental standpoint, it's actually starting to really perform well."

Netflix has been shunned by investors in recent months as stock plays that benefit from the economy reopening have received a boost. Bapis, however, thinks Netflix has staying power even with restrictions being lifted across the country.

"As people start to go back to work, we start doing other things, you're still going to have downtime, whether it's traveling, whether it's in the evening, whether it's other times on vacation. You're going to watch the streaming movies. They have probably one of the best catalogs of all movie libraries out there," said Bapis. "I would just own it and put it away."

Ari Wald, head of technical analysis at Oppenheimer, says the technicals suggest long-term gains for Netflix.

"We are recommending buying the underperformance that we've seen in Netflix," Wald said during the same interview, noting that the stock has consolidated at around $550. "What's notable is that a lot of that consolidation all occurred above the stock's rising 200-day average. So, it was able to work off these previously overbought excesses without damaging the trend either."

Since gapping up after earnings in January, the stock has also formed a double bottom above $515 that should now act as support, Wald said.

"As long as you're above $515, our assumption is that the long-term uptrend does resume itself, that Netflix ends up making new highs," Wald added.


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