Netflix (NFLX) stock recently got a boost following bull notes from at least two brokerages, observes Lillian Currens, deputy editor with the leading options advisory service, Schaeffer Investment Research.
Wells Fargo upgraded the stock to "overweight" from "equal weight," and lifted its price target to $400 from $300 -- marking its second-highest target price among analysts.
The analyst sees Netflix's new ad-supported tier driving roughly 23 million incremental subscriber ads by 2025's end, adding that churn could improve next year. "NFLX is using every arrow in the quiver," said Wells Fargo, as it works to bounce back from a tumultuous year.
Meanwhile, Cowen named Netflix stock a "best idea" for 2023. The brokerage firm also lifted its price target to a Street high of $405 from $340, noting new monetization levers and the lower price ad tier as key drivers for shares.
There's plenty of room for a shift in analyst sentiment — 14 brokerages called the stock a "strong buy," compared to 15 "hold," and three "strong sell" ratings. What's more, the 12-month consensus price target of $292.72 is a 7.7% discount to the stock's recent close.
An unwinding of pessimism among short-term options traders could also push NFLX higher. The equity sports a Schaeffer's put/call open interest ratio (SOIR) of 1.15, which sits in the slightly elevated 67th percentile of its annual range. In other words, these traders are much more put-biased than usual.
Joining these traders doesn't seem like a bad idea, either, as NFLX options can be had at a relative bargain right now. The stock's Schaeffer's Volatility Index (SVI) of 55% stands higher than just 28% of readings from the past year. In other words, traders are pricing in relatively low volatility expectations on Netflix stock at the moment.
What's more, the equity sports a Schaeffer's Volatility Scorecard (SVS) of 87 out of 100. In other words, the stock tends to outperform said expectations — a great thing for buyers.
Another reason to bet on Netflix: the stock has found support at a confluence of trendlines, including its 40-day moving average. In fact, the 40-day captured two of the security's latest pullbacks before launching the stock even higher.
The 20-day moving average is also a trendline to watch moving forward. Just above, investors should keep a close eye on the $330 level, which served as a floor for the stock ahead of its mid-April bear gap, and acted as a ceiling for the stock's latest rally earlier this month.
