After one-day wobble, Netflix climbs again
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After one-day wobble, Netflix climbs again

At the beginning of the week, streaming video on demand (SVOD) market leader Netflix released a second-quarter earnings report that was… well, pretty good, really. Just not as good as analysts and investors expected (you can read our take on it here). The market being what it is, cooler heads have surfaced, and – presumably – people have had a chance to sit and reflect on Netflix’s second quarter a little less hyperbolically. The result? Netflix is climbing again – and it seems to be taking a few other tech stocks with it.

Since its sudden decline, Netflix’s share price has regained 8% - now up almost 90% year to date

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Source: Yahoo Finance

Netflix’s share price performance has been nothing short of astronomical this year, and even after its wobble earlier in the week, the stock is up by nearly 90% in the last seven and a half months. That makes it the second-best performer on the S&P 500 this year (for a brief spell in the week before, it was number one). Hence, it’s pretty easy to se why Bernstein analyst Todd Juenger wrote in a note to clients: “for those who wanted an entry point, here it is.”

The thing that’s letting Netflix keep its share price above water, so to speak, is pretty clear: nothing about the company’s success has been random. It’s a very predictable trajectory (we’d add “with the benefit of hindsight” but the truth is, we’ve held this stock for years and reaped a triple digit performance from it).

Here’s the deal: Netflix was an early mover in a massive trend in entertainment (streaming video on demand). It focused on original content, which turned out to be a good move, and is now a giant compared to its peers. Management seems to know what it’s doing, and the company is pursuing sensible expansion strategies around the world. No one should be wondering what the story behind Netflix’s success is, because it is easy to see – and until that story changes in some way, it’s easy to believe in.

All that said, this week is seeing a minor tech rally that goes beyond Netflix. The company’s FANG peers (Facebook, Amazon and Alphabet) were all “trading at record highs Tuesday, along with the Nasdaq Composite Index,” according to Bloomberg.

Disclosure
Dominion holds Netflix, along with Amazon and Alphaet, in its Global Trends Ecommerce Fund.


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