This big-tech name may be underperforming the broader market, but the stock looks poised for gains ahead. Here’s why.
Netflix (NASDAQ: NFLX) has garnered headlines this week after winning big at the Golden Globes awards last Sunday and launching its “Fast Laughs” short video clips feature on Wednesday.
The new feature—which provides subscribers using the Netflix app on iPhones with a feed of comedic clips from the company’s catalog of films, shows, and stand-up specials—puts the streaming giant in closer competition with the likes of TikTok. And much like social media apps, Netflix allows users to share Fast Laughs clips on other platforms, including Snapchat (NYSE: SNAP), Twitter (NYSE: TWTR), and Facebook (NASDAQ: FB) owned WhatsApp and Instagram.
And at the Golden Globes, Netflix won 10 statues. Four categories were taken by its series “The Crown,” and it won acting nods for the films “I Care a Lot” and “Ma Rainey’s Black Bottom,” and limited series “The Queen’s Gambit,” among other wins.
Even as it ventures into the social media space and continues to produce content that wins accolades, Netflix shares are lagging the rest of the market.
The stock is down more than 5% so far this year, underperforming the S&P 500’s nearly 2% gain in the same timeframe even after this week’s drop in the index.
But Michael Bapis, managing director at Vios Advisors at Rockefeller Capital, says investors should take the pullback as an opportunity to buy into Netflix.
“Frankly, we think this little bit of a breather is healthy,” Bapis said. “They were one of the largest outperforms last year. Their subscriptions were up, 20+, 22% year-over-year in the fourth quarter. From a fundamental standpoint, it’s actually starting to really perform well.”
From a technical perspective, Oppenheimer’s Ari Wald says the stock is set up for long-term gains.
“We are recommending buying the underperformance that we’ve seen in Netflix,” Wald, the firm’s head of technical analysis, said. “What’s notable is that a lot of that consolidation [around $550] all occurred above the stock’s rising 200-day average. So, it was able to work off these previously overbought excesses without damaging the trend either.”
Bapis noted that Netflix shares have taken a hit in recent months as investors shifted to reopening trades instead. But he argues the company will continue to perform well even as coronavirus lockdowns ease and the economy opens back up.
“As people start to go back to work, we start doing other things, you’re still going to have downtime, whether it’s traveling, whether it’s in the evening, whether it’s other times on vacation,” Bapis said. “You’re going to watch the streaming movies. They have probably one of the best catalogs of all movie libraries out there.”
“I would just own it and put it away,” Bapis concluded.