Netflix Stock Is Back At Highs With A Lot More To Come

Key Points

• Shares of Netflix are back at record highs after more than 2 long years of recovery. 
• Strong fundamental performance has underpinned much of the gains. 
• The technical setup remains attractive, and analyst expectations remain bullish. 

And just like that, the streaming giant and tech titan Netflix Inc NASDAQ: NFLX is back at all-time highs. It will be a welcome occasion for investors and long-term fans who've been following it. They'll know more than most that the stock was last in blue sky territory in late 2021 and suffered more than most during the interest rate hikes and all the subsequent volatility through 2022 and 2023. 

For context, Netflix shares lost more than 75% of their value in the 7 months after hitting that last all-time high, and it's taken them more than 2 years to recover all of that. But recover it, they most certainly have, with as much as a 250% rally since the summer of 2022, making them one of the better-performing mega-caps out there in recent years. 

Meta Inc NASDAQ: META, regarded as one of the strongest tech stocks in recent years, has "only" managed to return 166% in that time frame, while Amazon.com Inc NASDAQ: AMZN and Alphabet Inc NASDAQ: GOOGL have both added less than 40%.

So what's behind the recovery, and how much higher could Netflix run? 

Bullish Fundamentals

To answer the first question, much of the turnaround has been fuelled by a return to growth beyond what investors were expecting. Take Netflix's most recent earnings report, for example, from last month. They smashed analyst expectations for both earnings and revenue while sharing higher-than-expected forward guidance for the coming quarters. Its user growth numbers were strong, while operating income jumped more than 40% year over year.That kind of bullish update has been present in many of their reports going back the past couple of quarters, and it's fair to say investors are expecting more in the ones ahead. They're not the only ones with big expectations for Netflix, either. The team over at Evercore ISI just this week reiterated their Outperform rating on Netflix stock while boosting their price target up to $750. 

This was off the back of a quarterly survey the research firm ran on Netflix across the US and Mexico. Their findings supported the thesis that Netflix's fore metrics are stable while its competitive position "remains as strong, or stronger than ever." 

Optimistic Outlook

For investors considering getting involved but who are worried they've missed out on much of the gains, consider this other comment from Evercore; "Netflix is in the strongest position financially, fundamentally, and competitively that we have ever seen." That's a powerful stance to be taking, and their $750 price target backs it up. Considering Netflix shares closed below $685 on Wednesday evening, that's pointing to a targeted upside of 10%. 

Less than a month ago, the team at Oppenheimer was taking a similar bullish stance, with a price target of $725, while UBS Group did the same only with a $750 price target like Evercore. Wells Fargo even named them as one of the few individual stocks still worth holding through the end of the year. Based on all this, it's clear that expectations are high for Netflix to continue delivering solid fundamental growth, which will underpin continued share price appreciation. 

Technical Setup

From a technical standpoint there are a few things to keep in mind ahead of any entering any position. Netflix's MACD is still in a bullish formation, suggesting the momentum is very much on the bid, while the stock's relative strength index (RSI) is warm, but not too warm at 60. 

It's also worth pointing out that the stock is taking a very obvious breather since tagging the all-time high last week. It didn't close at its high that day, and it had its lowest close since then last night. This suggests that the bulls might not be fully confident that a breakthrough rally will happen right away, and we could be looking at a few days of profit-taking and testing by the bears. 

However, the broader uptrend is very much intact, and based on everything above, any dip from here would be a welcome opportunity before the next phase of the rally begins.