Netflix (NFLX) may a strong opportunity.
After gapping from $525 to about $350 on earnings, the stock has become incredibly oversold on RSI, MACD, and on Williams’ %R. With patience, we’d like to see a gap refill.
Helping, Bill Ackman’s Pershing Square just bought over 3.1 million shares of the stock.
“We recently purchased more than 3.1m shares of @Netflix which makes us a top-20 holder. I have long admired Reed Hastings and the remarkable company he and his team have built. We are delighted that the market has presented us with this opportunity,” Ackman tweeted.
In addition, in his letter to Pershing Square shareholders, Ackman noted:
“Netflix’s business has highly favorable characteristics which include:
- Its subscription-based, highly recurring revenues, which have enormous future growth potential
- A truly best-in-class management team and unique high-performance culture (consider Netflix’s remarkable pivot from DVD rental by mail, to video streaming, to becoming one of the greatest producers of beloved content ever)
- Economies of scale and superb quality in its industry-leading content, which should continue to drive future growth and widen the company’s powerful competitive moat
- Pricing power derived from the enormous value it delivers to consumers compared with other alternatives
- Substantial margin expansion, with the opportunity for continued improvement due to economies of scale and the company’s rapidly growing, global subscriber base
- An improving free cash flow profile which should allow for continued investments in growth as well as the return of cash to shareholders”
On the news, NFLX is up about $13.41 or 3.73% in afterhours trading.