Please ensure Javascript is enabled for purposes of website accessibility

Netflix at $200 Isn't Crazy Anymore

By Rick Munarriz - Oct 11, 2017 at 1:46PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The top dog in premium streaming is hitting new highs, but it comes at a time when the value of short positions has never been higher. Something has got to give.

Shares of Netflix (NFLX -0.98%) hit another all-time high this week. The leading premium streaming service is drifting higher after moving to hike prices on some of its plans last week. The ceiling is rising on Netflix's revenue per subscriber, and with that it's only natural to see the ceiling on the stock itself move up unless the dot-com darling stretches the limits of its pricing elasticity.

Longs are happy. Shorts are not. The stock hitting $199.40 on Monday finds it closing in on $200, a round sum that would actually be $2,800 if not for a pair of stock splits along the way. That's not too shabby for a stock that went public at $15 -- split-adjusted to $1.07 based on today's prices -- a little more than 15 years ago, only to go on to lose two-thirds of its value when it bottomed out a few months later. 

Netflix is rolling again, but good luck convincing naysayers that this isn't a bubble.

The cast of "Sense 8" toasting at a bar.

Image source: Netflix.

Short-sellers circle

There were 29.6 million shares of Netflix sold short as of mid-September, its highest level of bearish activity since October of last year. The stock has nearly doubled in that time, a cruel reminder to those betting on the stock's decline that calling the top on a winner can be even harder than calling the bottom on a loser.

The doubters aren't going anywhere, at least until they get their margin calls or are convinced they're fighting a losing battle. Last week's rate hike could've triggered a short squeeze, and we'll find out if that happened later this month when we get Netflix's mid-October short interest. However, before we even approach that pocket of insight, we have Netflix reporting third-quarter results early next week. Last year's third quarter was a blowout, sending the stock 19% higher the following day. Then again, Netflix stock was also coming off of a disappointing second quarter -- and the stock was trading for half of what it's fetching at the moment. 

It's still easy to picture Netflix coasting north of $200 on a strong report, and that's if the shares don't drift higher in the next couple of days ahead of the fresh financials. Many Wall Street pros are already on that side of the fence. UBS issued a $225 price target on the shares earlier this month, and that comes three months after BTIG analyst Rich Greenfield also boosted his goal on the stock from $170 to $225. 

This week alone we've seen Morgan Stanley go to $225 and Loop Capital bump its price target to $228, following last week's price hike on Netflix's most popular streaming plan. Momentum is clearly in Netflix's corner, and as the best performer among S&P 500 stocks over the past decade -- even though it's only been in the index since 2010 -- betting against the stock has been as wrong as it's been dangerous. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Netflix, Inc. Stock Quote
Netflix, Inc.
$184.06 (-0.98%) $-1.82

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.