Netflix Stock Breaks Out to All-Time Highs

Netflix, Inc. (NFLX) shares rose more than 9% on Tuesday after the company reported better-than-expected first quarter financial results. Revenue rose 40.2% to $3.7 billion – beating consensus estimates by $10 million – and net income of 64 cents per share beat consensus estimates by one cent per share. In addition to the strong financial results, subscriber growth was strong, with 1.96 million new subscribers blowing past estimates.

Analysts reacted very favorably to the first quarter financial results. Morgan Stanley maintained its Overweight rating and $370 per share price target, saying that the results are a rare combination of a subscriber beat and margin guidance boost. Meanwhile, GBH Insights called the subscriber count "eye popping" and maintained its Attractive rating and $375 per share price target on the stock given the favorable results. (See also: Netflix Skyrockets on Higher Subscriber Growth.)

From a technical standpoint, the stock broke out from prior highs made in early March to fresh all-time highs of $338.62 during Tuesday's session. The relative strength index (RSI) appears a bit lofty with a reading of 66.26, but the moving average convergence divergence (MACD) experienced a bullish crossover that could signal further upside. These indicators suggest that the stock could see a short-term pullback before resuming its uptrend.

[Find out how to develop a trading strategy based on supplemental indicators like the MACD in Chapter 4 of the Technical Analysis course on the Investopedia Academy]

Traders should watch for a continued breakout from prior highs and a move toward R2 resistance at $359.82 on the upside. If the stock breaks back below its prior highs, the stock could move to retest the pivot point and 50-day moving average at around $295.48. Traders should maintain a bullish bias on the stock given its solid fundamental performance and technical momentum moving into the second quarter. (For more, see: Why These 4 Big Tech Stocks Are Bargains.)

Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.