Wall Street has doubled down on Netflix this week even as the stock hit news highs.
Morgan Stanley on Thursday upped its price target to $450, calling Netflix a leader in the streaming space. Goldman Sachs and JPMorgan also raised their targets, and on Wednesday Canaccord Genuity repeated its buy rating, citing subscriber growth.
Wedbush kept its contrarian underperform rating on the stock, pointing to cash burn as a headwind. Wedbush’s call is one of five negative ratings on Netflix among analysts.
Netflix has had a record-breaking rally this year. The stock is up nearly 40% in 2020 and notched an all-time high Thursday for a second day in a row.
After such a steep run-up, Ascent Wealth Partners managing partner Todd Gordon sees a level in the charts that should provide cushioning in case of a pullback.
“We are long, we hold it in our portfolios at Ascent. Long-term monthly chart looks great, we just broke from a two-year consolidation,” Gordon said on CNBC’s “Trading Nation” on Thursday. “You could see the breakout was right around $390 so if you get any kind of give-back, that should be viewed as support.”
Netflix traded Thursday just below $440. A move to $390 represents 11% downside.
Like Wedbush’s warning on cash burn, Chantico Global CEO Gina Sanchez agrees that the company could face challenges tied to its spending.
“The thing that we’re watching right now with Netflix is their expenses. If you look at the tremendous expenses that they have gone to build their original content, it’s been a huge number. And so right now, they have tremendous tailwinds. The question will be, what happens when you get more competition to keep all of those viewers, once everybody gets back to work?” Sanchez said during the same interview.
Other streaming platforms have also gained traction, including those from Amazon, Apple, and Disney. Disney+ recently announced that it had surpassed 50 million subscribers.
“I agree with Gina,” said Gordon. “The balance sheet looks tough with $15 billion long-term debt, $2.6 billion in operating income last year. But their shows are ranking consistently. … There’s tailwinds, [but] we hold it, and we like it.”
Disclosure: Ascent Wealth Partners holds Netflix.