Netflix Failing To Deliver Recently For The Bulls

Netflix, Inc. NFLX stock has gone from a market leader during the April to September time frame to being a true laggard versus both technology and the broader market since September's peak. That lagginess has grown even more conspicuous over the last few weeks as the stock moved lower even as the market was setting new highs.

Can the company start wowing Wall Street enough with its fundamental prowess that the stock will respond with higher prices? Let's take a look at the Netflix story.

What The Bulls See

• A reasonable price-to-sales ratio of 4.07.
• Positive levered free cash flow of $2.99 billion annually.
• A strong balance sheet: $1.67 billion in cash equivalents and only $900 million in debt, a current ratio of 1.50 and a debt-to-equity ratio of only 52.18 percent.

Related Link: Citigroup On Netflix: Waiting For The Blurry Picture To Come Into Focus

What The Bears See

• Rich valuation metrics: a market capitalization of $20.6 billion that trumps the enterprise value of $20.11 billion, a price-to-book ratio of 12.27 and a PE of more than 70 versus estimated 2015 revenue and EPS growth of 23 percent and 39.5 percent, respectively.

The Technical Take

Technicians note that Netflix broke down technically in early October when shares gapped down through its long-term uptrend line support. Shares even tried to rally back up above the broken trendline and failed -- another win for the bears.

Now deeply oversold, the stock has got to try to hold support at $340.77 so it can make a run at regaining its technical bullishness. If support at $340.77 holds up, a bounce up to the $420-$460 range could be in the offing. A failure at support, however, will likely lead to a quick drop to $314.21.

Overall…

Adventurous bulls may be entering their buys at or near the $340.77 level, but will also likely be honoring stops on closes below $340. On the other hand, short-sellers may be looking to sell any rallies up to around $455, with stops in place on any close above $460. However, any rally that occurs in the stock could be counter-trend in nature and not the start of something big on the upside.