This stock could see big upside over the next year. Here’s why.
Stocks have been rallying since the Fed’s dovish turn earlier this month, with the S&P 500 now sitting just shy of the record high reached last week.
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Many investors have been sitting on the sidelines in this rally but for those who are looking to play catch-up, one expert says this big name stock is the right pick.
“One name that stands out—household name, it’s in this high-beta index—is Netflix (NASDAQ: NFLX),” said Ari Wald, Oppenheimer’s head of technical analysis. “The stock is pretty much unchanged over the last year, but we’re siding with what is still a long-term uptrend that is pointed higher.”
Netflix is the second-best performer among the FANG stocks—Facebook (NASDAQ: FB), Amazon (NASDAQ: AMZN), Netflix, and Google-parent Alphabet (NASDAQ: GOOGL, GOOG)—this year and is up 38% year-to-date.
But after its rally at the start of the year, the stock has been stuck in a tight trading range. However, while shares have largely held flat for the past few months, Wald says Netflix is now positioned for a breakout.
“The key support level is $337. That’s the 200-day moving average,” Wald said. “From a trading basis, put your stop there, but I think you get the breakout through $385. That’s the level that has held back the stock through this year-long range. I think you get the breakout and that marks the resumption of Netflix’s long-time uptrend.”
In order to reach its 200-day moving, Netflix shares would need to fall around 9% and the breakthrough level of $385 would represent upside of 4% from Thursday’s closing price and 14% from the $337 level.
Wald isn’t the only Netflix bull on Wall Street. Just last week, Piper Jaffray analyst Michael Olson reiterated the firm’s Overweight rating on the stock and set a price target of $440, suggesting possible upside of 19% over the next twelve months.
Olson believes Netflix’s total addressable market may be considerably larger than some estimates given its potential to penetrate mobile-only households.
“When looking at current Netflix adoption as a percentage of internet or pay-TV households, we see international significantly lagging domestic, suggesting potential for dramatic international growth in the coming years,” Olson wrote in a note.
Olson estimates that Netflix currently has a presence in 18% of international broadband households, excluding China, and just 8% of international households with mobile-only users.
“Looking to CY21, investor anticipation around potential for >20% penetration of Netflix across global (ex-China) internet households could lead to a ~50% move in Netflix in the next 12 to 18 months,” Olson wrote.