Netflix Is A Beast! – NLFX

I really hope that you are starting to listen… if you aren’t already. Nearly a year to this day, I first mentioned Netflix (NFLX) on this site. I then followed it up by adding it to my 4 stocks to buy in 2009, and have since continued to worship it since. You can read my latest analysis of Netflix here, which basically called the very move of the most recent big pop. Throughout this whole time what has the stock done? Just gone from $22 to $54. That’s a 152% return in one year.

To put this in perspective, during that same time Apple (AAPL) was +89% and Amazon (AMZN) was +142%.

The funny thing is that I first started recommending this stock not necessarily based on the numbers or charts, but on a simple theory, that as the economy gets worse more people will begin to try cost saving measures. Netflix seemed like a great candidate because: (1) It allows people to watch unlimited movies without having to leave their house, which saves money. (2) With ability to watch shows online for free, now consumers could stop their cable television and save money with a Netflix subscription. Nothing complicated here…

Once the thought popped in my head, I then continued to do my analysis and the rest is history. Investing/trading is just like a business, if you think there is demand, then it can be a good business move. Best of all, you don’t have to spend extra money starting the business yourself, just pick up some shares of a company related to your idea and let them do the work.

TWI Charts of Netflix

So what’s behind the big push upwards? Between April to September of 2009, the stock price of Netflix was stagnant. Mainly due to the fact that many investors tried to the ignore the signs that the economy was really not improving, and I believe the big substance behind Netflix’s move higher is the economy. I don’t think it is a coincidence that as the market tanked this stock started to take off. I stated in my Q3 results that Netflix would take off again if we start hitting some rough waters, which seems to be whats happening in October so far.

So as Netflix reported last week, they not only shared great numbers but raised guidance for the rest of 2009. See summary. Not to mention the continue collapse of Blockbuster (BBI), which is only improving Netflix’s monopoly grip on video rental.

To make things things even more interesting, this move came on massive volume. In fact, the last time Netflix experienced such a size, the stock followed with a 15 point move over a month and a half. Remember the importance of volume.

So what’s next for Netflix? This is definitely the million dollar question… literally to some. As we head into the winter months, consumers stay in, and we continue to struggle with unemployment, Netflix should continue to stay on track with its guidance; however, the main struggle is to wonder how much Netflix has left in the tank. Combine the facts that the stock is already up 150% and at its all-time high, in can definitely takes some guts to get in right now if you aren’t already.

There looks like there is some support developing around the $50 level, so if you’re willing to take the risk and try to ride out this wave, then why not give Netflix a shot? If any stock can do it, this one can.

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