 Hey everyone! This is Dan with my first video on Netflix. Netflix has gone up by 15% just in the last two months. When SMP went down by almost 4% in the same period, all the other Fang stocks also went down in the last two months. What's causing this awesome performance of Netflix? Some people say it's because of their very popular TV series Squid Game which tops the charts in 90 countries. Is it just a short-term phenomenon? Well, Netflix have the steam to keep going up for the next few years. I did my deep dive analysis on Netflix and found the company to be an excellent investment choice for at least the next couple of years. Let's get into the details. This is going to be fun. First of all, let's look at how Netflix has been performing compared to the Fang stocks and Microsoft and the broad market in the past year. This is the daily chart. The candlestick chart here is Netflix. As you can see, Netflix performance has not been very impressive until about two months ago. Google or Alphabet is by far the best performing company within this chart went up by 88%. Netflix also went up by about 19%, which is not bad. But SMP and Nasdaq 100 went up by almost 30%. If you look at the other lines here, the gray line here represents Apple computer. They were pretty flat and then started to pick up recently and ended up about 25%, 26% in the last year. And this red line here representing Amazon was pretty flat all the way through and went up only by 3%. And then we have the rest of the Fang stock and the broad market having gone up somewhere between 30% to 40%. Now, if you look at the last two months, that's a very different picture. As we can see, Netflix here went up by 15.87% when SPY and QQQ represent the movements of SMP 500 and Nasdaq 100 actually went down by about 3% and all the other Fang stocks and Microsoft all went down with Facebook being the worst performer by being down more than 10% in the last two months. Definitely, Netflix's performance has picked up dramatically in the last two months. Here's an article from CNBC on October 7. The article says that there is still room to run for the only Fang stock hitting new highs this month, which is Netflix. And they talk about this very popular TV series, Squid Game, which is made in Korea and tops the chart apparently at 90 countries. Certainly, with a popular TV series like that, it really elevated the visibility of Netflix in the eyes of the investors. Now, the question is whether this is just a short-term thing or Netflix has something that will sustain the growth of its stock and its earnings in the next few years. This article published on July 24 says that Netflix is going to get into the online gaming business pretty soon, which is a very fast-growing market. As you probably know already, Netflix has been producing a lot of very popular movies and TV series. They are gradually transforming themselves into not just a movie distributor, but a movie producer. In light of that, I am here comparing the different movie studios with Netflix. If you look at the top seven movie studios in terms of box office incomes, the top one is Warner Brothers and then next to that Universal Picture in Columbia Pictures with Warner Brothers having the world wide box office income of $46 billion. That's 2020. But now they usually share the box office revenues of course with the theaters and other entities that work with these movie studios. If you look at the revenue of Warner Brothers in 2020, it was $30.4 billion and the revenue for the second place Universal Pictures $28.1 billion. How about Netflix? This is a table showing the total revenues of Netflix since 2017 all the way through the trailing 12 month period ending the second quarter of 2021 this year. As you can see, the revenue grew from $11 billion to $15 billion to $20 billion. And now only halfway through 2021 they already grew to $27 billion. So by the time they wrap up this year, they will most likely exceed $30 billion in revenue and that will be approaching the revenue of Warner Brothers. The net income for each year is listed here and more impressively, if you look at the net margin, it grew from 4.8 percent in 2017 to 15.9 percent trailing 12 month period. Definitely the net margin has been growing fast. That means they are benefiting from the economies of scale. And by the way, they spend $12 billion on developing contents in 2020, which amounts to about half of their revenues. So definitely they're devoting a lot of money to creating new movies and TV series that definitely muscling their way into the universe of the movie studios. So Netflix is no longer Netflix we know from five, six years ago. If you like what you've seen so far, I'd like to encourage you to click the like, subscribe, and notification button. That'll enable you to receive notification when I publish my next video. It will also encourage me to make more videos like this in the future. Thank you very much. Let's continue. Let's look at some financial data. These charts are generated by the Better Investing Stock Selection Guide Database. First, let's look at the sales of Netflix since 2011. As you can see, it's been going up very steadily. And I compare their sales with the sales of Comcast, which owns Universal Pictures and Disney and Viacom, which owns Paramount Pictures. All these other companies do not see nearly the very steep increase in sales. And if you look at EPS, definitely very steep increase in EPS from one year to the next for Netflix. Whereas the other companies, not as impressive and actually Disney really took a tumble in 2020. If you look at their stock price compared to their sales and EPS, the stock price seems to be going up somewhat faster than the revenue increase, but not as fast as the EPS increase. That means they still have the chance to have steeper increase in stock price, which will bring the increase more in parity with the increase in EPS. That's a bullish sign. If you look at their debt to capital ratio, of course lower the ratio to better. They have this ratio going up for a few years, peaked out in 2018. And since then it's been dropping, which is a good sign. That means they're paying off the debts while generating more and more revenues and profits. Let's look at the valuation of Netflix. First, I listed out the fan companies and Microsoft. Netflix is here with the trailing P ratio of 65, which is pretty high. According to Yahoo, they give them a forward P ratio of 49, which is still pretty high. However, the peaked ratio with the five year going forward, Yahoo calculated that to be just 1.3, which is a very conservative number. The reason why they can justify such a high forward P ratio is because the earning growth has been extremely impressive. Then to calculate how much is Netflix worth, I used the following assumption. First of all, I assume 43% annual EPS growth. And actually in the last five years, the EPS has been growing at 77%. Therefore, it's very likely that they can grow at the 43% rate in the next three, four years. And I used an average forward P ratio of 49, according to this number here. And then I used the current trailing 12 months earnings, P ratio, market cap, and stock price. Using these assumptions, I extrapolated the stock price for 2021, 22, and 23. And I got a range of $723 a share to $1,400 a share. For now, I want to be conservative. I am setting a target of $710 a share to be reached by the end of January, 2022. And the current price is about $633. So definitely there's quite a bit of room to go up yet, according to my target. One of the analyst's opinions, again, the closing price as of the last trading day, which was October 8, it was $632.66. My target is $710 to be reached by the end of January. Yahoo Business gives them a buy rating. The rating of 2.1 out of 5, the smaller number the better. Of course, 2.1 is a buy rating. And the high target is $971, average target $619, and low target $340. Louis Navalier doesn't like the much, only gives them an overall C rating. Tip ranks, it's a moderate buy with a high target of $780, average target $629, and low target $342. CN Money, a buy rating. High target of $971, the median target of $643, and low target $342, the street.com buy rating with a target of $709. Comparing to these analysts ratings with the exception of Louis Navalier, my target of $710 is pretty much in line somewhere between the high targets and the median or average targets. That's why I'm fairly comfortable with my very conservative target of $710. And later on, as Netflix price goes up, I will adjust my target upwards. But at this point, we have a little bit of headwind specifically related to the broad market. I'll talk more about that later. Well, we've looked at enough charts and numbers. Let's get to the artistic side. Let's look at the Academy Awards or Oscars won by Netflix in the last few years. Looks at Netflix won these Best Picture Awards. As you can see, 2019, Roma won an Oscar, 2020, the Irishman, 2020, Marriage Story, 2021, Mank, and 2021, the Trial of the Chicago Seven. And then they also won quite a few Best Director Awards, and they all happened pretty much in 2019, 2020, and 2021. So that's a fairly recent development. And definitely with all the investments that Netflix put into producing movies and TV series, they are really earning a lot of recognition in the motion picture business. If you look at the list for Emmy Awards and Golden Globe Awards, it's just the same. A lot of recent awards, very important awards won by Netflix. So Netflix competitors, the movie studios should be very scared. And the flip side is that the investors of Netflix should be very happy. Let's look at Netflix competitive advantages. First of all, they have fast growing revenues and net income in the last few years. We saw those numbers ready. And they spend more than $12 billion, about 50% of the revenue in 2020 on creating content. So they're really serious about producing good movies and good TV series. And they are willing to experiment. They've offered experimental movies and foreign movies and TV series. And they have been very successful, like what we've seen with the Switch game, which is produced by Korea. And the streaming video market is estimated to grow around 18% year over year in the next few years. Netflix sales has been growing at 17% per year, pretty much in line with the industry growth. And if they continue to keep on top, there's a lot more profits to be earned by Netflix. We have already seen that they have improving net margins because of economy of scale that builds a protective mode around Netflix, which makes the lives of the other movie studios tougher and tougher and makes the investors happier and happier, hopefully. Who are their competitors? There are many competitors including Viacom, CBS, NBCUniversal, Direct TV, YouTube, HBO, Tivo, Hulu, Warner, Media, Fox and Disney. And that's why I'll be tracking the development of these other companies very carefully. But we've seen already in the charts previously that Netflix growth in income and sales definitely outpaced at least Universal, Disney and Paramount. Let's look at the charts. Before we dig into the Netflix chart, we should look at the broad market to get a little perspective, especially we need to know how the S&P has been trending. Here's the chart showing Netflix, the candlestick chart, and then SPY, the purple line here representing the movement of S&P 500. In the last three months, as we can see Netflix went up by 18%, definitely very impressive. SPY went up by only 0.54%. And in fact, if you look at since the beginning of September, SPY has gone down by almost 4%, whereas Netflix has gone up by more than 14%. So definitely Netflix has been moving in the opposite direction of the broad market, which is definitely very impressive. However, the broad market is like the water level. When the water level is rising, it will lift almost all boats. And when it's going down the broad market, most stocks will sink. And at this point, it's possible that if the broad market continues to go down, it might pull down Netflix as well, in spite of the strong fundamentals of Netflix. We already saw Netflix losing steam a little bit in the last couple of days. And that's alarming. And that's why even though I'm bullish on Netflix for the next two, three years, I'm not buying yet. I'm waiting for the red candle to turn green before I buy in. And definitely if the broad market starts to pick up and starts to recover, that will be a very bullish momentum for Netflix as well. Let's look at a daily chart for Netflix. We can see that Netflix has been going up nicely since the end of June. But in the last couple of days, it has come down a little bit. If you look at the RSI indicator here, we have an overboard situation starting a couple of days ago. And sure enough, it started to come down. Another overboard situation here earlier in July. Again, the stock price came down. At this point, it's pretty much according to where we are now. So it is possible that Netflix might come down and might even touch the middle of the bolinger band before it bounces up again. I would definitely way to buy on a dip and definitely not buy at this high point now. If you look at DMI indicator, it's been bullish since the middle of August. Although it's been coming down a little bit, but overall it's still bullish. MACD bullish here and then turn bearish for a few days, actually for a couple of weeks, and then it turned bullish again about a week ago. Overall, it's still bullish on a daily chart, but we can see Netflix losing momentum here. Our only chart, not so good. We can see here, Netflix reached a peak on Thursday. RSI hit an overboard situation. Sure enough, the price started to come down. And last time it had an overboard situation here, price also came down, similar to the daily chart. DMI turned bearish on Thursday, then it struggled to go up a little bit, then it dropped down again and went back into the bearish territory. MACD has been bearish since Wednesday, three days ago, and it was trying to get above that yellow line to become bullish, but it failed to sustain that momentum and it dropped down again and now it's still pointing towards being bearish. And that's why I'm not going to be buying Netflix immediately. I definitely will wait for the hourly chart to start turning bullish again or maybe even a daily chart to turn bullish before I start committing a lot of money in Netflix, but I will buy Netflix definitely within the next couple of weeks, when the time is right. Let's look at the support and resistance levels. I drew the Fibonacci extension diagram. There are many ways to draw the Fibonacci extension diagram. I like to draw it so that it will be able to predict some of the historical price points. For this chart I selected the maximum point right here in the beginning of this year. For the minimum point I selected here in the middle of September last year, as you can see the Fibonacci extension diagram predicted this point, this point, and this point. So that tells me that this chart is quite usable. For support level I see 631, which is right here, Fibonacci 38%, and 614, this line, Fibonacci 23%, also a historical high here. And the next line down 599, which is the 20-day moving average, and the next level down will be 586, the Fibonacci 0%, the previous max, achieved in January of this year. Hopefully we don't get to that point anytime soon. And then for resistance I see the next level 645, which is right here. Actually it scratched that line and then dropped down quickly, and that was Fibonacci 50%, as predicted by the diagram. And the next level up 658, Fibonacci 61%, next level up 678, this line. What are my strategies? I definitely will keep in mind the short-term bearish S&P index. As the broad market goes down, it has a tendency to pull down everything, and probably including Netflix, unfortunately. I will wait for the hourly chart for DMI, MACD to turn bullish, or even a daily chart to turn bullish, before I start buying a lot of Netflix shares. And after I've bought the shares, I will hold on to some of them for the long term, and I'll swing trade the rest. And I will sell when the price pulls back at a major resistance level or whenever news develops. I will buy when the price bounces up from a major support level or when positive news develops. And I will update my subscribers by way of Twitter messages about my latest trades, as well as any significant news developments. Let me recap my price target. I expect Netflix to reach $710 a share before the end of January 2022, and the current price is $632. At this point, I'd like to encourage you to subscribe to my Twitter account, which is DanMarketL. For example, on September 27, because the market was going down and BioNTech also went down together with Moderna. At that point, I sold some BioNTech shares and TQQQ shares. And since then, the price has gone down a lot more, so that was a good time to sell the shares locking my profit. And then on October 1, then the market started to have a bit of a recovery. And I look at the daily new cases for COVID, and that seems to be reducing. That's why I bought LUV, Southwest Airlines, one of the reopening stocks. And since then, I'm seeing a paper profit for the shares that I bought on October 1. So that was a pretty good move. And then on October 4, I bought some BioNTech shares. After I sold some shares on September 27, of course, I bought at a lower price after I sold at a profit a few days earlier. And I'm still seeing a paper profit on those shares. On October 4, the reason why I bought was because the price was getting support at 150 days, simple moving average. Again, I'd like to remind you to click the like, subscribe, and notification button. As usual, I will very much welcome your comments, questions, and suggestions. I'd like to remind you that I'm not a financial advisor. I share my stocks trading strategies and analyses for educational purposes only if you want to buy and sell stocks. You should make your own decisions and do your own research, and you should definitely consult with your financial advisors before you do so. This is about wraps up my video for now. I will chat with you again in the next few days. In the meanwhile, I'd like to wish you the very best of luck with your financial investments.