Netflix threatened below $70 after 40% plunge, analyst Jay Woods fears technical breakdown
As Netflix reports its quarterly earnings on Thursday, analyst Jay Woods anticipates a possible fall below the $70 threshold, a level not seen since 2024. The stock, already down 40% over the past year, could hit $57 if support gives way.
Netflix is set to report its second-quarter results after Wall Street closes on Thursday, an event that could push the stock below the critical $70 threshold, according to Jay Woods, a strategist at the NYSE. The stock, already down 40% over the past year, is testing a key support level that, if broken, would open the door to a decline toward $57.
A technical threshold at $70 under high pressure
"This stock has been beaten up," Jay Woods told CNBC, noting that shares could slip below the $70 level, a floor Netflix hasn't touched since September 2024. Woods identifies a risk of a "fold," a chart pattern suggesting an inverted repetition of past movements. "If that's not the case, we are seeing a major breakdown," he warns.
The bearish scenario is becoming clearer: if results disappoint consensus expectations, the stock could accelerate its decline before a potential rebound. "If it breaks $70, watch $57 in the long term," Woods adds. A relief rally could bring the stock back into the $80s, but the analyst remains cautious: "We'll see if it's a relief rally or something more." The stock has already fallen after each of the last four quarterly reports.
A busy macroeconomic week ahead
Beyond Netflix, the week will be marked by several major macroeconomic events. Testimony from Federal Reserve Chairman Kevin Warsh before Congress will be scrutinized for any hints on the rate path. Meanwhile, the Bureau of Labor Statistics will release the Consumer Price Index (CPI) on Tuesday and the Producer Price Index (PPI) on Wednesday. "That will really dictate the direction the Fed takes," Woods believes.
Two other earnings reports are also expected: Johnson & Johnson and Fifth Third Bancorp, which will set the tone for the healthcare and banking sectors.
Structural causes of Netflix's decline
The 40% drop in the stock over the past year is not solely due to earnings volatility. Netflix issued disappointing guidance earlier in the year, while its aborted bid to acquire Warner Bros. Discovery sowed uncertainty about its growth strategy. The departure of Reed Hastings, co-founder and former chairman of the board, also weighed on investor confidence.
From a chart perspective, the $70 threshold is a major support level, tested for the first time in nearly two years. A weekly close below this level would validate a bearish breakdown, with a target of $57, representing a potential additional decline of 18%. In the event of a rebound, the $80-82 zone would act as initial resistance, followed by $90.
Investors will also watch trading volume on Thursday and Friday, which could confirm or refute the strength of the move. High volume accompanying a break below $70 would reinforce the bearish scenario.
Impact on European markets and the streaming sector
Although Netflix is a US stock, its weight in the Nasdaq index and its role as a barometer for the streaming sector have repercussions on comparable European stocks. In France, companies like Universal Music Group or Vivendi, exposed to media and entertainment, could experience correlated moves. Thematic ETFs like the iShares Digital Entertainment could also be impacted.
For French investors holding Netflix shares via a CTO, caution is warranted. A position below $70 would justify a tight stop-loss, while a rebound above $80 could signal a temporary turnaround.
