Netflix Stock Hits 52-Week High Thanks to Coronavirus Stay-at-Home Orders

Netflix continued to avoid the stock market’s coronavirus-induced downturn on Monday, with the streaming giant’s share price increasing 7% on the day.

At nearly $397 per share, Netflix closed Monday at its 52-week high — and is within striking distance of its all-time high of $411.09 per share, set during the summer of 2018. Since the beginning of the year, Netflix’s share price is up 20%, while the Dow Jones Industrial Average, which has been rocked by the global economic fallout of COVID-19, is down 19% over that same time span.

Analysts told TheWrap that the main reason investors are flocking to Netflix is simple: There’s less to do right now.

“The market is correctly pricing in that stay-at-home orders mean greater consumption of in-home entertainment,” Wedbush analyst Michael Pachter told TheWrap. “Obviously we’re not going to sporting events or movies, and we’re certainly not commuting, so we have an extra couple hours a day to consume entertainment — and we are.”

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Netflix has been bolstered by the release of “Tiger King,” which quickly became a pop culture phenomenon, last month, along with the return of “Ozark,” which typically debuts during the summer.

Pachter added that “churn is probably down dramatically” for Netflix in Q1, with more people clinging to their subscriptions due to fewer entertainment alternatives. This would be a case of the rich getting richer, though, since Netflix already has a relatively small problem with churn; Netflix last year had about a 5% churn rate, Leichtman Research Group recently shared with TheWrap.

Overall, Netflix’s bull run is backed by little more than sentiment and investor anticipation the company will share a strong Q1 earnings report next week, according to Leichtman Research Group President Bruce Leichtman.

“It’s not fully rational,” said Bruce Leichtman, president of Leichtman Research Group, about Netflix’s jump. “People are trying to find winners in this environment and have targeted Netflix as ‘the winner.’ Maybe there’s some upside internationally, but domestically there isn’t much at all. I think people need to check their math a little bit.”

(Netflix had 167 million subscribers heading into its first quarter, with 61 million of those coming from the U.S.)

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Pachter agreed, saying the market has made the assumption that because people are watching more Netflix, they’re spending more. But that’s not necessarily the case.

There’s another issue on the horizon the market hasn’t factored in yet, Pachter added.

“What the market is missing is that Netflix is going to be running out of stuff,” Pachter said. “They’re not producing any content. That’s a problem and that’s going to exacerbate churn.”

For now, though, investors are betting on Netflix benefiting from global stay-at-home orders — at least in the near-term.

“They’re gonna kill it. The numbers are going to be great,” Pachter said about Netflix’s upcoming Q1 report. “I get why the stock is up. I just think people are being shortsighted.”

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