(Note: The author of this fundamental analysis is a financial writer and portfolio manager. He and his clients own shares of NFLX.)

Netflix Inc. (NFLX) shares have surged by over 100% so far in 2018 and over 140% over the past year. But in recent weeks the optimism around international subscriber growth has pushed shares of the streaming media company to record highs, perhaps even driving the stock up to far too fast. A wave of profit taking is hitting the stock today, sending shares lower by over 6% as of 1 p.m. ET to $386.

The bad news is the stock may not be finished falling yet and could be about to decline by another 7% based on an analysis of the technical chart over the short-term. 

Shares May Decline Further

The stock hit a high of about $423 and have since fallen to $386, below a technical support level at $392. The next level of technical support for Netflix comes about 7.5% lower, at $357. It would give the stock a total decline of over 15% from its peak. 

The relative strength index (RSI) also peaked at very high levels. A stock is overbought when the RSI rises above 70. Netflix's RSI rose to over 84 on the same day the stock was peaking. Even with the sharp decline in the stock today, the RSI has only fallen to 56. The RSI would need to decline to about 30 before being oversold

Increasing Targets

Optimism has been building in the stock over the past couple of weeks after receiving multiple analysts rating upgrades and increasing price targets. According to data from YCharts, the highest price target on Netflix is currently $500. The high price target has increased by nearly 20% just since the end of May. But as a group, not all analysts are as optimistic, setting an average price target on the stock of only $342, nearly 11% below its current price. 

NFLX Chart

NFLX data by YCharts

Upping Estimates

The earnings outlook over the next two years has been steadily improving. In fact, analysts have upped their earnings estimates for both 2019 and 2020 by about 10.5% since the middle of April, the last earnings report. 

NFLX Chart

NFLX data by YCharts

It would seem the optimism investors have about the potential for subscriber growth in Netflix is unlikely to fade anytime soon. Meanwhile, the company will likely not report its next round of quarterly results until sometime in the middle of July, and if expectations on the stock continue to build ahead of that earnings release, then it would seem unlikely any pullback in the stock is likely to last for long. 

Michael Kramer is the founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdingsInformation presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.