Netflix just smashed earnings estimates and is roaring higher in extended trading on Tuesday.
Its shares rocketed nearly 12 percent to $386.50 after hours.
Gina Sanchez, CEO of Chantico Global, says the surge is largely driven by Netflix’s ability to overcome one of its biggest hurdles.
Netflix soars ahead of earnings from CNBC.
“Netflix was obviously able to quell the subscriber growth concern that had been haunting them in the market,” Sanchez told CNBC’s “Trading Nation” on Tuesday.
The streaming giant added nearly 7 million new subscribers in its third quarter and guided for as many as 9.4 million new adds from October to December. Domestic subscriber growth came in 61 percent higher than estimates, while international growth topped forecasts by more than 1 million.
However, another one of investors’ concerns is still hanging over the company, says Sanchez.
“They actually have some pretty significant debt needs, debt financing needs, going into a higher interest rate cycle,” said Sanchez. “Are they going to continue to go fuel those massive expenses with debt? … I think that’s what they need to clarify in their earnings report.”
Before the earnings release, Todd Gordon, founder of TradingAnalysis.com, laid out Netflix’s technical vulnerabilities. He said a break below $320 could breach key technical support and instigate a swift move to levels not seen since sell-offs in February.
“If we break, I think you do have the opportunity to get down to about the $250 mark. That’s where technical support comes in, sourced all the way back to that 2015 uptrend line, so near-term I think it’s vulnerable,” said Gordon on “Trading Nation” Tuesday.
Netflix first broke through $250 at the beginning of the year, briefly fell below it in February, and then surged to new highs over the summer. It is currently a 27 percent drop away from $250.