Streaming company Netflix (NASDAQ:NFLX) announced last week that it would be raising prices for its plans in Canada and the U.S. The move will help manufacture some growth for the business and sparked excitement from investors, with the stock initially jumping on the news. Does this development make Netflix a better buy, or is the stock still too expensive to own?
In just the past three months, shares of Netflix have fallen by 17%. The sell-off has been so extreme of late that the stock is now deep into oversold territory, with a Relative Strength Index (RSI) of less than 24. RSI looks at a stock's gains and losses, normally over a 14-day period, and when it is below 30, that suggests it is oversold.
However, even amid the sharp decline, it's still not near its 52-week low of $478.54. It has been trending down but its 50-day moving average is still comfortable above the 200-day mark.
The company releases earnings this month and that can dictate which direction its shares go from here on out. In October, when Netflix last posted its third-quarter numbers, its revenue of $7.48 billion was in line with analyst expectations and its global net paid subscriber additions also came in better than projected.
Even strong results haven't been enough to save the stock from falling. And with Netflix still trading at a hefty 47 times earnings, unless it has a strong Q4 to finish the year, it might still endure more of a decline in the weeks and months ahead. Investors may be better off waiting for more a decline before buying the stock.
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