Netflix, Inc. (NASDAQ: NFLX) continues to look attractive to value investors, particularly those employing out-of-the-money short-put strategies in the current market environment.
NFLX closed at $73.69 on August 6, recovering from a recent bottom of $67.60 hit on July 20, though still well below its April 16 peak of $107.79.
The stock’s decline followed its Q2 earnings release on July 16, after which the market pushed shares down over 7%, a reaction many analysts now regard as an overreaction.
According to analysis by Mark R. Hake, CFA, NFLX stock could be worth between $77.22 and $85.70 per share over the next year, representing a midpoint valuation of $81.45.
Analyst price targets from multiple sources reinforce that bullish outlook, with Yahoo Finance citing an average target of $94.33, Barchart showing $95.00, and AnaChart putting the figure at $108.38.
Averaging those three targets alongside Hake’s more conservative $81.45 estimate produces a blended price target of approximately $94.79, suggesting NFLX remains at least 22% undervalued at current levels.
For investors looking beyond simple stock ownership, the short-put options market is presenting a compelling income opportunity tied to that valuation gap.
A put option with a strike price approximately 5% below the current trading price and expiring within one month is generating a yield of around 2.0% for sellers of that contract.
Hake previously identified a similar trade on July 19, recommending investors short the $65.00 put contract expiring August 21, which carried a premium of $1.28 and offered a yield of 1.97% at a strike price 5.73% below the then-trading price of $68.95.
With NFLX rising from $68.95 to $73.69 in the two weeks since that recommendation, the premium on that contract collapsed to just 8 cents at the midpoint, allowing investors to buy it back and net approximately $1.20, or a realized yield of around 1.846% on the trade.
A fresh short-put position targeting a $70.00 strike establishes a breakeven price of $68.56, which sits roughly 7% below the August 6 closing price and offers a potential upside of 38.3% should NFLX recover to the $94.79 blended price target from that level.
Combining the two sequential short-put trades executed around the earnings release, investors could have captured a total yield of approximately 4.03%, representing a strong return for a strategy designed to limit downside exposure while generating income.
The approach is particularly suited to value investors who believe NFLX is undervalued but want a margin of safety built into their entry point rather than simply buying shares outright at current prices.
With the stock still trading well below consensus price targets and a clear income-generating mechanism available through the options market, the short-put strategy on NFLX continues to offer an attractive risk-reward profile heading into the late summer trading period.
