I love Netflix ($NFLX) - I love the product, I love the company, and I have loved the stock for quite sometime. Seems the investment community loves the stock as well, bidding it up over 107% in 2015, and up over 1084% over the past 3 years versus the 38.7% gain for the S&P over the same period. To put it in perspective, Netflix ($NFLX) now sports a $43 Billion Dollar valuation after starting the year as a $21 Billion Dollar company.
One could argue for or against Netflix ($NFLX) fundamentals all day long. Does the P/E ratio matter when a company is growing and expanding like Netflix ($NFLX) is? Does one pay up for a company disrupting how folks watch media, or pay more attention to the companies balance sheet?
I guess the best answer to the question is: when the markets are going up, it is easy for folks to overlook some possible red flags. When markets are going down or look weak, thats when growth names start to lose some of their luster.
As I prefaced this article, I still love Netflix ($NFLX), but I feel in this current market environment Netflix ($NFLX) is a stock that is extremely vulnerable to downside. It won't matter much about Technicals, Fundamentals, Growth, or Earnings.
I think Netflix ($NFLX) is headed to at least $85 in the coming weeks, and will continue to play for downside. I flipped the $95 weekly puts for a nice profit and added some $85 puts for next week:
This chart helps put the 2015 move in perspective:
Just like the market has been doing, Netflix ($NFLX) can certainly bounce at any time, but like an anchor, will continue to be pulled south.
Will update if my position changes or if the stock tests $85.
Happy Trading!
- JB