When Signals Align

Netflix Inc. (NFLX) is another instance where signals from Portfolio Armor and LikeFolio have aligned. At the end of October, the stock hit our top names, as I noted at the time,

After its recent rally, Netflix is only down 38% from its pedophilia movie 🎥.

Why the tide may be turning. $NFLX $DRV https://t.co/J1zKsidu19

— Portfolio Armor (@PortfolioArmor) October 27, 2022

And at the end of December, it was one of our top names again, so I bought shares of it as part of our core strategy. It’s up about 17% since then, after Friday’s post-earnings move. Let’s talk about a couple of reasons why investors may be warming to Netflix now.

Netflix Cements Its Lead In Streaming

Before Netflix released its earnings on Thursday, LikeFolio shared this chart with those of us on their email list:

Although, as LikeFolio notes there, new streaming subscription rates are falling across the industry, Netflix has been bucking the trend.

Netflix Earnings Were Better Than They Looked

As Michael Pachter noted, their GAAP profit was wiped out by their markdown of a euro-denominated bond, their operating profit beat their guidance by a big margin.

operating profit $451 million vs. $330 million guide. They crushed it

Currency translation made them mark a Euro denominated bond down, wiping out their GAAP profit, but it was non-cash

— Michael Pachter (@michaelpachter) January 19, 2023

Bear Market Risk In Mind

Although Netflix is doing well, as Carter Braxton Worth of Worth Charting has pointed out, the broader market is currently near an inflection point.

And if the market drops, Netflix shares will almost certainly drop with it. It might be a good time to hedge Netflix if you own round lots of it, or to hedge market risk via optimal puts on the SPDR S&P 500 Trust ETF (SPY) as in the example below.

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