Before the crash?: Secure your profits now at Netflix, otherwise it will be expensive!

Welcome to the Smartbroker+ Chart of the Week – Netflix

Within the US technology sector, there is a surprising winner based on the past 12 months' performance. Among blue-chip stocks, despite the continued enthusiasm for AI stocks, the best performer is not Microsoft or Nvidia , but Netflix, with an increase of 86 percent between May 12, 2024, and Monday, May 12, 2025.

The fact that Netflix shares survived the tariff panic triggered by US President Donald Trump relatively unscathed contributed to the significant outperformance not only compared to other technology stocks, but also to the overall US market index S&P 500. While prices also plummeted amid the general uncertainty, they were nowhere near as sharp as elsewhere. Netflix is ​​currently only 2.5 percent away from its recent all-time high of $1,164.

Although the stock's chart currently shows little indication of an imminent turnaround, investors should proceed with increasing caution. The sustained price gains have led to a sharp increase in valuation, while the technical indicators are simultaneously overheated and showing initial signs of trouble. Is now a good time to take profits?

Netflix chart signals

• Advanced uptrend: Netflix stock is in a dynamic but already well-advanced uptrend.
• Stock overbought: The technical indication points to an overheating of Netflix shares, especially on a long-term timescale.
• Bearish divergences: Bearish divergences are present in the RSI and MACD, indicating a sustained trend reversal could be imminent.
• Growing risk of correction: The risk of correction in Netflix shares is growing, also because the company is overvalued and analysts see little further potential.

Is Netflix now facing a turnaround?

Despite intensifying competition in the streaming business, Netflix shares have performed exceptionally well in recent years. In addition to the high resilience of its business model, the company's pricing power is a key factor in its success: The net margin was 23.1 percent over the past 12 months – by far the best in the industry.

Rival Walt Disney, for example, only recently crossed the profit threshold with its Disney+ offering, while competitors like Apple and Amazon are paying the price and cross-financing their streaming businesses from other profitable business areas. Improvements in cash flow—Netflix had long experienced significant cash outflows due to high production costs—have also ensured sustained investor interest and thus continued share price gains.

The recent highs were not technically confirmed

Despite the sustained rally since reaching a low in March 2022, the stock's chart is not flawless. Especially in recent months, problems have grown despite new record highs: Technical indicators have failed to confirm the stock's all-time highs. Both the relative strength index (RSI) and the trend strength indicator (MACD) are exhibiting bearish divergences and are trending downwards against the stock's trend.

The divergences are particularly striking in the RSI, partly because they originated from already overbought conditions. In addition, the RSI has failed to significantly improve at numerous highs in recent years, including the most recent all-time high. While the MACD performs better here, it also failed to confirm the most recent high.

Wedge formation could initiate a turnaround

The stock's trajectory structure also raises questions. In recent weeks and months, a so-called broadening ascending wedge has emerged. However, this formation is considered bearish rather than bullish in technical analysis. There is a risk that a stock will fall because, at the end of a long uptrend, it lacks the momentum to achieve another upward breakout.

This is precisely the situation currently prevailing with Netflix stock, which is overbought even at the highest time frame with a monthly RSI of 81. Even if it were to manage another breakout, the chances of this being a sustained price movement are slim given the bearish divergences in the technical indicators.

Experts see no further price potential

While the stock is technically at risk of running out of steam, its valuation is also becoming increasingly unsustainable. A price-earnings ratio of 44.5 is priced in for 2025. This is almost three percent above the already high five-year average of 43.2. Meanwhile, the industry average is 19.2. The stock is also above its own valuation and the industry average on other valuation metrics. The financial information platform SeekingAlpha gives Netflix shares a solid six. Even the company's growth, with a price-earnings growth ratio of 1.15, is no longer attractive. Values ​​below 1 are considered worth buying here.

Wall Street experts are still predominantly bullish. On average, Netflix receives a buy recommendation. Of a total of 50 reviews, the stock is recommended as a buy 26 times and as an overweight 8 times. Fifteen analysts recommend a hold, while only one expert has dared to recommend a sell.

However, the median price target of $1,096.58 – a price roughly four percent below the previous week's level – indicates that the stock is unlikely to rise any further. Investors with exposure to this stock should therefore consider taking profits and looking for less highly valued stocks.

Netflix at a glance

• ISIN: US64110L1061
• Market capitalization: $485.2 billion
• Dividend yield: -
• KGVe 2025: 44.5
• Average analyst recommendation: Buy

Author: Max Gross, wallstreetONLINE Editorial Team

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At the time of publication, Netflix shares are trading at a loss of -2.65 % and a price of EUR 1,110 on Nasdaq (May 13, 2025, 2:00 a.m.).