It's been a rough year for most stocks, but you don't see Netflix (NFLX 7.32%) investors complaining. Shares of the company behind the world's leading premium streaming service hit a 52-week high of $417.82 on Tuesday, and by Wednesday morning it had scored an all-time high.
A year ago Netflix was in a pickle. Disney (DIS 3.30%) had unveiled its Disney+ platform on April 11, and Netflix stock plummeted a day later. With the competition approaching at much lower subscription rates, the same analysts that were cheering Netflix's price hike earlier in the year suddenly became fearful that the top dog was pricing itself out of contention. There were a few more plot twists along the way, but Netflix has proven that it's once again able to pull off a Hollywood ending. Let's go over a few of the reasons why shares could continue to move higher even at these seemingly lofty levels.
1. Next week's earnings report should be solid
Earnings season is sneaking up on investors this time around, and Netflix will be posting financial results shortly after next Tuesday's market close. Netflix used to routinely shine with its quarterly updates, but it proved mortal last year. It fell woefully short of its subscriber guidance in the second quarter as a result of its springtime price hike, and followed that up by clocking in with a smaller miss in the third quarter. When it missed its domestic guidance for the fourth quarter, it was widely attributed to November's launch of Disney+ eating into its business.
Netflix has historically been conservative with its guidance, so to see it on a three-quarter losing streak in forecasting its stateside audience isn't ideal. However, with last year's price hike fading in the rearview mirror and Disney+ already a known quantity, it's easy to believe in Netflix again. It's likely to get back into winning form with its April 11 report, and so far this week we've seen two analysts raise their price targets. They obviously want to come out as bullish ahead of Netflix's numbers, and that's an encouraging sign.
2. This is perfect Netflix weather
Disney+ may have scored with The Mandalorian late last year, but we're back in familiar territory with Netflix leading the dance of pop culture relevance in 2020. Love Is Blind was the hit reality show of the first quarter, and the country's first hit of the self-quarantine era is obviously Tiger King.
Tiger King has been so successful that old-school networks are hopping on the bandwagon. Fox aired an entire show dedicated to stars of the outrageous documentary on Monday night, and this past weekend we saw Tom Hanks kick off Saturday Night Live with "Hey all you cool cats and kittens," the signature greeting of Tiger King's Carole Baskin.
There will be new services, and rivals will score transcendent hits every now and then. However, Netflix is the the steady drum that the world marches to, and that's even more important now that we're all under stay-in-place orders with more time than ever to stream.
3. What's good for Roku is good for Netflix
Shares of Roku (ROKU 3.33%) soared 10% on Tuesday after the company reported strong preliminary results for the first quarter. Roku's audience has grown 37% over the past year, and those nearly 40 million active viewers took in 13.2 billion hours of content through the first three months of this year -- a 49% increase since the year-ago period.
Consumption rising faster than audience growth is a sign of engagement, and we know that Netflix has been at the heart of that stickiness since it's the one putting out most of the industry's hit shows, movies, and documentaries in 2020. Strength in Roku's ecosystem may not always translate into a boost for Netflix, but right now -- with Netflix as both the king and the King Midas of content -- Roku's blowout news yesterday should translate into Netflix coming through with blowout news next week.
Netflix hit some turbulence last year, but it's smooth sailing right now. It remains one of the market's top stocks, and that makes it a strong buy even at all-time highs.