Netflix (NFLX) splits 7:1 on 7/15. Here’s your trade. (June 23, 2015)
Lets look at Netflix ( NASDAQ:NFLX ). Everybody’s all lathered up now. The stock hit a new high, 692.79, that was on Wednesday the 10th, right? Well yippee; we’re above that now. Do you know why? Well it’s been a big, huge fundamental shift in the company; they’re splitting 7 for 1. We all knew this was coming because that was one of the reasons why the stock jacked up so much before.
They got authorization to issue new shares, etcetera, etcetera, so they’re splitting 7 for 1. I joke about it from a fundamental standpoint because there is no change in the fundamentals; it’s just the same. If the stock is at $700.00 and you have a share then when it splits you wind up having seven shares except they’re worth $100.00 each. Add seven shares at $100.00 together, what do you get? $700.00.
Here’s the deal, I guarantee you that the stock is going to be above $700.00 before this thing splits in a month, no question about it. Look and see what happened with the stock after hours, I guess about when the news came out. My bet is around 4:30 people are already buying this stock. This is the way of the market.
Back in the 90’s when everybody was a genius, we were all young good looking, in great shape, and really rich, because we all knew how to buy call options on stocks. A company would split their stock, look what would happened; in fact I was just looking at this for another reason. Look at Microsoft ( NASDAQ:MSFT ), 2 for 1, 2 for 1, 3 for 2, boom, boom, boom, on and on and on. The stock opened, started trading at like 10 cents pre-split on all of this; it was as low as 8 cents, now it’s at 45.91. That’s the magic of splits.
My point is, stocks split. Microsoft ( NASDAQ:MSFT ) by the way, no thank you. But Netflix ( NASDAQ:NFLX ); stocks split, they go back up and they tend to keep doing that all the way up until that they don’t. Now, I would suggest this, I would suggest being really bullish on Netflix ( NASDAQ:NFLX ) between now and when they split. You’re going to see some gyrations in this stock.
The one thing that I want you to think about, and I talk about this with members a lot, that stock splits are really good indicators, they tell you whether there’s any really under currents in the stock. What I mean by that is, when this stock splits 7 for 1 the liquidity is going to increase by a factor of 7; it’s going to have 7 times the liquidity that it did pre-split so it’s going to be very easy to buy shares. You can put less money and still feel like you’re getting more shares.
There are a lot of retail folks who will not buy a $700.00 stock but they’ll buy a $70.00 stock even if the market cap is ultimately is the same. That’s just the way folks trade. So if the stock splits and then the stock starts selling off, what you know is that a least part of the reason why the stock had been moving up is because it was just hard to buy, there weren’t that many shares being traded. But once the market’s flooded with more shares then it’s easy to buy.
Well then people don’t have to pay that much money for it because there’s that much more supply. So I want you to keep track of how this stock trades after the split, that’s more important to me than how it trades between now and the split. Except, if I’m looking to make money, which I am, that’s the stuff that keeps me warm at night. I’m going to be looking at Netflix ( NASDAQ:NFLX ) to go higher in to the split, at least over the next few days. Yes the stock’s extended, but it’s Netflix ( NASDAQ:NFLX ), it isn’t a house of cards.
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