Netflix shares trying for a Comeback

NetFlix Cobra Commander

Netflix is recovering after being crushed, time for a look.

Netflix Inc (NFLX) is creeping up slowly from its 12 month low, its now regained 9% from its bottom of $56.55.  Recall Netflix fell from $80 a share overnight to the low $60 range just weeks ago after it disappointed the world on its Q2 earnings call. 



The company's Q2 call came down to lowered expectations on subscriber growth and the slow death of its DVD business.  In order for Netflix to get back its $300 share price, where does the growth come from? Is the future for Netflix's growth dependent on its breakout into Europe and abroad? 


The quick answer: No one is willing to pay a high multiple on Netflix shares if they can't deliver the growth and add subscribers. 


Netflix believes it will be at 7 million subscribers by the end of 2012.  If they don't hit that number and if we get any more warnings its an instant 52-week low for Netflix shares.


At this point to go long on Netflix is a leap of faith that they are going to hit their numbers.  If they don't, shareholders will lose. 


MASTERY Bottom Line (Lightning Dude Style)


MASTERY Bottom line:


Mastery is keeping an eye on Netflix and at this point its beginning to look 'Netflixy'.  With a decent bounce from its 12 month low, its time to add it to your watch list.


However if you are going to hold Netflix get ready for a bumpy ride if they deliver any more bad news in the coming weeks.


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If you think NFLX is making a large "rounded bottom" in prices, one could consider selling out-of-the-money Put options, or Put options spreads, for income.