Netflix, Inc. (NFLX) shares jumped nearly 2% higher on Friday after breaking out from trendline resistance. With earnings expected on July 17, traders are positioning themselves for a breakout next week if financial results come in better than expected. The company's first quarter revenue was merely in line with estimates, growing 34.7% to $2.64 billion, but earnings per share of 40 cents beat estimates by three cents.
Analysts remain divided on Netflix's long-term potential. Morgan Stanley recently increased its price target to $185.00, citing positive international subscriber growth rates. At the other end of the spectrum, Bernstein reiterated its Underperform rating and $73.00 price target due to the stock's high valuation compared with peers. Overall, Netflix stock has 24 Buy ratings, 14 Hold ratings and three Sell ratings with an average price target of $160.00 per share. (See also: Netflix Should Be Earning a Lot More on Its $11 Bn Content.)
From a technical standpoint, the stock broke out from its pivot point at $154.53, 50-day moving average at $156.72 and trendline resistance at $157.50. The relative strength index (RSI) appears moderately overbought at 61.54, but the moving average convergence divergence (MACD) experienced a bullish crossover that could signal upside ahead. Traders should maintain a bullish bias on the stock as prices move toward all-time highs.
Traders should watch for a breakout from R1 resistance at $161.75 to new highs and R2 resistance at $174.10. If the stock fails to break out, shares could move lower and consolidate between the pivot point at $154.53 and R1 resistance at $161.75. Traders will be keeping an eye on the stock as the company's earnings announcement approaches next week. (For more, see: Netflix: 7 Secrets You Didn't Know.)
Charts courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.