During today's afternoon trading session, Netflix plummeted to $867.08 per share. It's still 9.94% above its mean target price of $788.67, so there may still be room for more downwards movement -- even after today's -3.4% drop. Analysts are giving the Discount Store stock on average rating of buy, with target prices ranging from 550.0 to 1100.0 dollars per share.
The market seems to share this optimistic view, since Netflix has a short interest of only 1.9% (this is the percentage of the share float that is being shorted). Each short position represents an investor's expectation that the price of the stock will decrease in the future.
Short selling involves borrowing shares and then selling them at current market prices. In the successful version of the strategy, the shares are purchased at a lower price at some time in the future. The investor then returns the shares to the lender, and keeps the profit made on the sell/buy transaction.
Another way to gauge the sentiment on Netflix is to look at the percentage of institutions that are invested in the stock. In this case, 86.3% of the shares are held by pension, mutual, and hedge funds, which shows that these institutions probably have strong confidence in the stock.
If institutions are invested in a particular stock, it shows in most cases that they have performed quality research and concluded that it is a good investment. In some cases, however, increases in institutional ownership could be a sign of a takeover attempt or proxy fight, which can actually injure share prices. Also, institutions are not infallible, and can certainly make miscalculations -- often with spectacular results.
Overall, there is mixed market sentiment towards Netflix because of an analyst consensus of little upside potential, a buy rating, a very low short interest, and a significant number of institutional investors. Investors should not base their decisions on market sentiment only, they should also be aware of a stock's fundamentals before committing.
At a glance, here are some essential statistics you may want to know about NFLX:
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It has trailing 12 month earnings per share (EPS) of $17.69 per share
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Netflix has a trailing 12 month Price to Earnings (P/E) ratio of 49.0 while the S&P 500 average is 29.3
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The company has a Price to Book (P/B) ratio of 16.31 in contrast to the S&P 500's average ratio of 4.74
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Netflix is a Consumer Discretionary company, and the sector average P/E and P/B ratios are 22.6 and 3.19 respectively
