It’s been in this sideways range for 12+ months now. And whenever any stock gets stuck in a range for a while, once it finally breaks out of that range, it usually sees a powerful move.
Netflix stock spiked to a record high of 593.29 on Jan. 20th 2021, the day after its fourth-quarter earnings report. Wall Street analysts were cheered by the company's improved free cash flow and profitability. But the enthusiasm was short-lived and NFLX stock sold off in the days that followed.
Netflix's future is too difficult to predict. I recommend existing shareholders to hold the stock. For new investors, you have to be realistic. Netflix has an estimated EPS of $12.89 for FY22. If you want to buy Netflix at 2022 FAANG PE multiple (25x), the stock price should be $320, decrease by 42%. This is unlikely to happen. Businesses like Netflix will never be at our fair value. That does not mean we should not buy them. I recommend waiting for the stock to be under $450, decrease by at least 18%, which would mean the stock is trading at or under a PE ratio of 35x FY22 earnings. In today's market, companies with powerful brands such as Starbucks (NASDAQ:SBUX), Disney (NYSE:DIS) or Nike (NYSE:NKE) trade at this multiple. They have proved their ability to be constantly innovating, just like Netflix.