After a Big Rally, Is it Time to Hit Sell on Netflix Stock (NFLX)?

Netflix (NFLX) has been on a tear lately, riding high on strong earnings, subscriber growth, and a successful pivot to ad-supported streaming. But after an impressive rally, some investors are wondering if the stock is starting to look overextended. With valuation creeping higher and competition heating up, some analysts warn that the upside may be limited.

NFLX Stock Looks Attractive

Netflix stock has surged 23% since April 2, outpacing the S&P 500, thanks to its resilience amid global trade tensions. Bulls see more upside ahead, driven by its expanding flywheel, including ad-supported plans, live sports, gaming, and even physical store ventures. While its valuation is rich, strong earnings growth potential could justify the premium.

Moreover, Netflix has a proven track record of outperforming during periods of macro uncertainty, delivering double-digit gains during the pandemic. Unlike traditional safe-haven assets such as gold, which may lose appeal following the U.S.-China tariff truce, Netflix is well-positioned to extend its strong performance through continued subscriber growth and content momentum.

The Pain Point Investors Can’t Ignore

The main pain point on Netflix right now is its valuation. Following its recent rally, the stock trades at around 43 times forward earnings. This is well above the S&P 500’s 21x and even pricier than the Magnificent Seven tech giants, which average about 27x.

The bullish argument rests on Netflix’s ability to grow earnings quickly enough to sustain its recent rally. However, not all analysts are convinced. Notably, J.P. Morgan downgraded NFLX stock last month and reaffirmed that stance this week. Five-star-rated analyst Doug Anmuth pointed out near-term concerns due to its sharp stock surge and outperformance. However, Anmuth maintains a bullish long-term outlook on Netflix, citing its strong streaming leadership and potential to evolve into a global television powerhouse.

Overall, Netflix remains a long-term growth story with strong streaming leadership and expanding revenue streams, but its high valuation and recent stock surge may limit near-term upside for investors.

Is Netflix a Good Stock to Buy?

Turning to Wall Street, NFLX stock carries a Strong Buy consensus rating. Among the 38 analysts covering the stock, 29 have issued Buy recommendations, and nine rated it as Hold. Moreover, the average Netflix share price target of $1,239.76 implies a 2.28% upside potential from current levels.

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