I am assigning Netflix (NASDAQ: NFLX) a positive risk/reward rating based on its leadership position in the global streaming market, discounted valuation, above-average growth potential, and its deeply oversold technical position coinciding with an incredibly strong long-term support zone.
Risk/Reward Rating: Positive
Netflix rattled the market when it reported Q1 2022 earnings on April 19, 2022, sending the shares lower by 45% over the following two weeks. The shock resulted from the loss of 203,000 members in Q1, and a forecast for Q2 2022 that calls for the loss of 2 million additional members. It should be noted that Netflix would have reported a membership gain of 500,000 in Q1 if not for the loss of its Russian members.
Growth
Nonetheless, the membership disappointment is material as the company had previously forecasted a gain of 2.5 million members in Q1, and a similar addition in Q2 2022. All told, Netflix is on pace to trail its original membership plan by over 7 million members through the first half of 2022.
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