Analyst: 'Buy' This FAANG Stock Ahead of Earnings

Options traders have been extremely bullish towards Netflix stock

Managing Editor
Apr 13, 2018 at 9:41 AM
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Shares of streaming concern Netflix, Inc. (NASDAQ:NFLX) are moving higher, after Deutsche Bank upgraded the stock to "buy" from "hold," and hiked its price target to $350 from $240. The brokerage firm said Netflix has "changed the industry in a profound way," and expects it to have 217 million international subscribers by 2025.

This continues a recent wave of positive analyst attention directed toward the FAANG stock, and comes ahead of Netflix's first-quarter earnings report, due after Monday's close. In fact, Wells Fargo also raised its NFLX price target this morning to $345 from $285, while Buckingham Research boosted its target price by $20 to $277.

Netflix stock was up 1.9% at $314.99 at last check, pacing for its eighth daily win in nine sessions. Plus, the shares are on track to snap their four-week losing streak. Plus, this upside has the equity back above its 30-day moving average for the first time since late March. Longer term, NFLX has picked up 115% over the past 12 months, and touched a record high of $333.98 on March 12. 

Not surprisingly, options traders have been heavily bullish on NFLX ahead of earnings, with data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) showing a 10-day call/put volume ratio of 1.94, ranking in the 100th annual range. This extreme preference of calls over puts suggests the former has been bought at a much faster-than-usual clip during the past two weeks.

Regardless of whether it's calls or puts that Netflix options traders are purchasing, the streaming name has handily rewarded premium buyers over the past year. NFLX currently sports a Schaeffer's Volatility Scorecard (SVS) of 87 out of 100, meaning the stock has tended to exceed options traders' volatility expectations in the last 12 months.

 

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