It's a plot twist that could lead to an unhappy ending.
Netflix is on its longest losing streak in five years after posting nine straight days of losses. Since July 11, the stock has shed nearly 20% with the steepest losses — to the tune of $24 billion — coming after last Wednesday's disappointing earnings report. It was down slightly in Wednesday's premarket.
The company did beat bottom-line estimates, but subscriber growth — a key performance metric for the streaming giant — missed analysts' expectations. The company also added fewer international subscribers than expected, and U.S. subscribers contracted for the first time in nearly a decade.
Newton Advisors' Mark Newton sees some temporary relief ahead, citing two key technical indicators that suggest the "stock is entering an area where it can actually stabilize."
The first is the stock's retracement. After sinking to a 52-week low at the end of last year, shares of Netflix spent the first seven months of 2019 steadily moving higher, ultimately notching a 35% gain. But with its current losing streak, the stock has now erased about 50% of that push higher and is back to where it was trading in January. This retracement is "technically significant," since it indicates a trend reversal may be coming, said Newton.
Newton is also watching Netflix's relative strength index, which suggests the stock may be getting a little oversold in the short term. When taken together, he said, these stock patterns signal a short-term bounce could be on the horizon.
But he says longer-term investors shouldn't hop in quite yet, since he anticipates the stock falling another 10% in coming months.
"I don't mind taking a stab from a trading perspective at $308, $309 thinking it might move to $320, but for those investing, I really still think it's better to wait until it gets to under $300. The stock is likely going to have more downside into the fall. So for me it's a little premature for investing right here," he said Tuesday on CNBC's "Trading Nation."Â
Netflix was at $307.10 in Wednesday's premarket.
Netflix's disappointing earnings result comes as the Street has begun to question the media company's place as Disney and NBC get set to launch their own streaming services. Netflix will also lose two of its most popular shows when "The Office" and "Friends" are removed from the platform in 2021 and 2020, respectively.
But BK Asset Management's Boris Schlossberg argues that while Netflix might not have the extensive backlog of content that competitors have, it does have a first-mover advantage.
"It's the only true global media broadcast company in the world, and I think people are just simply underestimating the impact of that going forward," he said. "I think just like with Amazon, just like with Chipotle, you got to close your eyes and just trust and buy at this point."
Schlossberg also believes the stock will break below $300 and maybe even test $275 before stabilizing. Ultimately, he said, Netflix eventually is "going to return very serious rewards."
"I think there's nobody — Disney — nobody else that can truly compete with them on a global scale, and that's why it's very much still a long-term buy," he said.
