- Netflix stock is about to form a death cross pattern on the weekly chart.
- The company published a weak financial results on Tuesday.
- Netflix lacks a clear catalyst to reboot the stock.
Netflix stock is in a freefall this year, turning one of the most popular media companies into a fallen angel. NFLX tumbled to $64 in premarket as investors reacted to its underwhelming earnings report. Its worsening fundamentals and impending death cross pattern suggest that it has more downside to go.
Netflix Lacks a Clear Growth Catalyst
Netflix has had one of the most inspiring journeys in the media industry. It has become a major disruptor in the media industry and inspired copycats like Disney+ and Paramount+.
Now, however, there are signs that the company’s business may have peaked, which explains why the management is no longer publishing member numbers.
The company said that its revenue grew by just 13% in the third quarter to $12.9 billion, with its operating margin hitting 34.6%. Some of this growth was due to price increases, which it implemented in March. It raised the monthly rate by $1 to $2 across all tiers starting with the United States.
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Netflix now hopes that its annual revenue will be $51.1 billion, up by 13% from a year earlier. Analysts expect that its annual revenue will then continue slowing. The average estimate is that it will make $56.9 billion next year.
These growth concerns explain why the company attempted a desperate move to acquire Warner Bros. Discovery in a $70 billion deal. Such a deal would have given it a famed Hollywood studio and other assets like HBO.
Netflix lacks a clear growth catalyst. There is a limit to how fast it can hike prices. Also, it has already expanded internationally and launched other services like advertising and gaming. As such, while it has a big market share, the room for growth is still muted since anyone who would want Netflix already has a subscription.
Netflix Stock Price Technical Analysis
NFLX stock chart | Source: TradingView
Technicals suggest that the NFLX stock has more downside to go. It has formed a series of lower lows and lower highs. Most notably, it is about to form a death cross pattern as the spread between the 50-week and 200-week moving averages has narrowed.
Netflix shares remain below the Supertrend indicator, and is about to drop below the 61.8% Fibonacci Retracement level. Therefore, the path of the least resistance for the stock is downwards, with the next psychological level to watch being $50.
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