Netflix WAS a Good Buy After Its Recent Earnings Plunge

On October 25th, I wrote

suggesting that Netflix

shares were a bargain at $78 after the company plunged 35% on a terrible earnings report. This was on top of a very steep plunge from the $300 level which was driven by price increases, lowered subscriber guidance, and a failed attempt to split the company's DVD and streaming businesses. Thus far, it does appear that $78 was a very good entry point in the stock. Shares have bounced nicely from that level and are currently trading above $92 - a very nice gain in a short amount of time. This short-term outcome is not surprising given just how negative sentiment had become in the shares. This was a good clue that a bounce was in the cards. There is nothing more bullish for a stock than a lack of sellers, and NFLX's decline had been so drastic, that anyone who was inclined to sell finally did so after the company's most recent earnings report. With the sellers out of the way, NFLX began rising again. At $92, shares are likely still undervalued on a risk/reward basis but investors may want to wait for the company's fourth-quarter earnings report before stepping into the name. The long-term thesis for NFLX has not changed - the market has just come to the conclusion that it may be much more difficult for the company to execute on it. If, however, NFLX becomes the leading global player in streaming, the stock could easily go up 1,000% from here over the next decade. The outlook for NFLX continues to remain in flux, but long-term investors who can tolerate some risk and volatility still are getting good odds in this name. Short-term traders should also keep NFLX on their radars, as the near-term price action in the stock has been very bullish and options traders continue to bet on more upside.