Netflix no longer shares the spotlight with those tech titans once known as the FANG stocks after Facebook changed its name to Meta Platforms and Google became Alphabet. But Netflix stock stands ready to make "The Killer" move it's been eyeing and get "Locked In" on a breakout.
Replacing the term FANG stocks, the Magnificent Seven stocks — Apple, Microsoft, Nvidia, Amazon.com, Tesla, plus META and GOOGL — now reign supreme on Wall Street.
Meanwhile, a sharply rising relative strength line, accelerating earnings growth, global audiences and artificial intelligence technologies have Netflix stock streaming toward a new buy point. It currently trades just 1% shy of a new breakout.
Joining Magnificent Seven stocks Apple and Nvidia, Netflix just made the IBD Breakout Stocks Index.
Late Tuesday, Nvidia obliterated Q3 estimates on huge data center growth. NVDA stock slipped on the news but remains in buy range.
See Who Joins Netflix Stock On The IBD Breakout Stocks Index
Wall Street Changes Its Tune On Netflix
Several factors continue to drive the big rebound in Netflix stock following a sharp decline starting at the end of 2021.
Continued cord-cutting from traditional pay-TV services remains a fundamental driver. This trend helped Netflix add 8.76 million subscribers in Q3, ending the quarter with 247.15 million members worldwide. Earnings growth accelerated to $3.73 a share, a 20% gain over the prior-year quarter. The report sparked a gap-up in Netflix stock, rising more than 16% on Oct. 19.
For the full year, analysts now forecast 23% EPS growth, followed by an even-bigger 30% gain in 2024.
Global Reach Boosts Binging For Netflix
Another factor catching Wall Street's eye is the growing global reach of Netflix, both for users and original content. The streaming pioneer has a footprint in more than 130 countries, operating virtually everywhere except China and Russia.
In addition, Netflix continues to develop a growing number of non-English language originals in Mexico, France, Italy, Japan, Brazil and more. With its global distribution, the company remains well positioned to bring engaging content from many cultures to people all across the globe.
Machine Learning: The X Factor For Netflix Stock
A third, not-so-secret weapon is artificial intelligence. While Nvidia, Microsoft, Alphabet and others grab much of the buzz surrounding this groundbreaking trend, Netflix has long tapped machine learning and other AI technologies.
Netflix invests heavily in machine learning, a key component of what is broadly referred to as AI. Machine learning powers the personalization and recommendations that drive the binge-watching and exploration that keep viewers engaged.
Netflix also uses machine learning to help shape its catalog of movies and TV shows by learning characteristics that make content successful. The company taps this technology to optimize the production of original movies and TV shows in its rapidly growing studios.
On top of that, machine learning also enables Netflix to optimize video and audio encoding, adaptive bitrate selection, and its in-house Content Delivery Network. That network accounts for more than a third of North American internet traffic. It also powers the company's advertising spend, channel mix and creative advertising.
Netflix Stock Streaming Toward New Buy Zone
While the term "FANG stocks" is no longer a thing and the Magnificent Seven stocks have stepped in to fill the void, Netflix stock continues to display its own magnificence.
Since its massive gap-up on earnings last month, the streamer has continued to rise. It now trades well above its 50-day moving average. Also note how the shorter-term 21-day exponential moving average has shot back above that benchmark. That action marks a clear sign of renewed technical strength.
As it takes aim at a 485 buy point in a third-stage consolidation, the relative strength line for Netflix stock has shot up to a 52-week high.
Volume, however, remains below average as the stock rises. The current chart pattern is a third-stage base, which can entail more risk. Look for heavier volume to kick in to confirm demand for an extended run.
Meanwhile, as the market indexes continue to build on the year-end rally, Microsoft and Meta stock have powered into buy range. Google stock has bounced above its 50-day line as it targets a 141.22 buy point. Fueled by the AI wave, Magnificent Seven stocks Amazon has also entered buy zones, while Tesla looks for traction to get above its 50-day line.
Nvidia posting blowout earnings after the close Tuesday. The stock slipped Wednesday, but remains in buy range heading into the Thanksgiving holiday and beyond.
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Follow Matthew Galgani on X (formerly Twitter) at @IBD_MGalgani.
