Is Netflix a Good Stock to Buy? – Discover in Details
As an investor, you must have concrete reasons to pick a stock. Trends are significant, without a doubt. But it would help if you had your go-to methodology for your investments, too. Is netflix a good stock to buy? Let’s Find Out.
In the end, you will choose the best-performing stocks only.
So, let’s talk about a trending stock- NFLX.
Netflix has added an advertise-supported service component. Fundamental analysts think that the stock prices will soar now.
Netflix started its journey in 1997. The innovative brand immediately started challenging market giants like Blockbuster.
However, Netflix’s real growth started after it entered the video services market.
Even then, the brand grew through ups and downs. However, Netflix’s USPs constantly introduce innovative products to storm the market.
Through thick and thin, new subscriber addition has never been a problem for Netflix.
Guide to understand Netflix’s steaming growth
Netflix is a highly tactical business from a strategic standpoint.
Their market entry gave them the first-mover advantage.
Netflix had the right idea of how the internet would radically shift content consumption.
They were spot on. They launched their streaming service as early as 2007. Today, Netflix has secured 270 million subscribers already.
What’s more interesting is that Netflix has had no direct competition in the last decade. Amazon Prime, HBO, Disney, Apple TV+, and others are niche-specific. Their presence is also quite territory-limited. Disney covers quite a few territories. But, it mostly plays second fiddle to Netflix, wherever they operate.
Amidst all the success, Netflix stock slumped in 2022. And by significant margins.
The stock value trickled by 51%, the biggest in recent times.
Subscriber declines in two straight quarters caused this.
But that couldn’t undermine the confidence of investors. When asked- if netflix is an excellent stock to buy, they’d mostly say yes.
However, how they returned with their advertisement-supported service was similar to Netflix. Netflix also cut down on sharing accounts among users randomly.
Consequently, their stocks increased by 65%.
Netflix kept adding subscribers. By 2023, they roped in 8.05 million subscribers. It surpassed the forecasts of 4.53 million. Many investors say yes when asked if Netflix is a good stock.
Hence, Netflix is highly investible from a business viewpoint. But what do fundamental analysts say?
Fundamental analysis of Netflix stock
Is netflix an excellent stock to buy?
Most fundamental analysts will say yes. Let’s understand why.
In the second quarter, Netflix’s total sales were $9.7 billion. And their EPS was $5.10.
Even Wall Street expected the highest possible EPS of $4.74.
So, Netflix was a reliable stock, no doubt. However, their Y-o-Y sales growth was only 14%.
It made analysts worry about the slow success rate of Netflix’s advertisement business.
But there were ample positive growth trends. Firstly, Netflix cracked a whacking deal with WWE. The prime-time show ‘RAW’ will air on Netflix starting in 2025. Meanwhile, Netflix began to air other shows, such as NFL.
The summation of live content will strengthen their advertising business now.
Moreover, Netflix is now drawing abundant traffic through its Netflix Original Series.
Shows like Money Heist, Squid Game, Stranger Things, etc., have also belted swathes of new subscribers.
Moreover, Netflix has premiered movies like The Old Guard, Murder Mystery, Bird Box, and others.
Therefore, Netflix faced competition from mainstream media apps like Paramount, Peacock, and Marner Bros. However, they also failed to compete with Netflix.
Eventually, Netflix will be the most significant market player in the global content genre.
The fundamental analysis shows that Netflix is a promising growth stock.
Each time their stocks trickled, they came back stronger, promptly.
Technical analysis of Netflix stock
Netflix recorded its record high of 700.99 in 2021. After that, Netflix marked a buy point of 639. Moreover, Netflix had an outstanding strength rating of 87 out of 99.
It shows Netflix performed better than most of the stock over the last 52 weeks.
Netflix has a composite rating of 93. That’s a good score, considering the best stocks have a score above 90.
Estimating Netflix’s Fair Value
Netflix’s stock may be overvalued. Its RSI value is already 70, marking its entrance to the overbought territory. Netflix stock is a component of the QQQ ETF. BTIG says this ETF has already been marked overbought.
However, Barclays Bank commented that Netflix’s high stock value was anticipated. To balance off market concentration, Netflix surfaced as an essential stock in the non-tech sector.
Otherwise, most of the stocks are from the tech sector only.
If you think Netflix is overvalued, you may explore the best energy stocks in the US.
It will diversify your investment portfolio.
Risks around Netflix stock
Most analysts feel Netflix stock is very uncertain. The abrupt growth of the streaming content industry has given Netflix inflated growth.
However, I perceive that Netflix’s stock values may slump due to stiff competition in the streaming industry. Everywhere, local OTTs are benching Netflix’s target audiences.
I also believe that Netflix only had the first-mover advantage. As a result, they are still the number 1 market force.
NVIDIA faced a similar situation in the tech stock market. However, the company thrived and retained its position by innovation and creativity.
If someone asks- is nvda an excellent stock to buy? I’d say yes in one breath.
You may have both stocks in your portfolio for a better Credit Mix.
Another risk involving Netflix is its aggressive pricing model. The company has been successful till now, no doubt. But that’s not all.
I dug deep to find that Netflix charges the highest among all known OTT platforms.
Prices have hiked several times in the last few years.
As they are becoming a media house, their COGS are increasing. However, the number of subscribers is growing at an equal pace.
Hence, price hikes often seem out of place.
This trend can become a source of potential vulnerability. Once upturned, Netflix may lose customers big time.
Initially, customers didn’t have an alternative to watch versatile content. But they have more than one alternative now. Hence, Netflix customers must expect more value-added content from Netflix to retain their subscribers.
Once that differentiation is not there, subscribers will start moving out. And that will trigger a slump in investors’ trust, too.
Bulls and bears of Netflix
There are more bullish than bearish investors of Netflix. That’s why Netflix is such a popular entertainment market stock in the US.
Bullish sentiments
Netflix has ample bullish investors. They believe Netflix’s hit shows will keep their finances ticking forever.
Netflix surpasses other global OTTs in terms of revenue.
The Bulls also hope the latest advertising-based subscription model will work wonders for the brand.
The growth may be slow now. But advertising will accelerate earnings soon.
Moreover, this subscription model will open the scope to acquire a base of alternative customers. It can be a great revenue source. However, Netflix had to undergo heavy expenses to rope in live content streaming rites from WWE, the NFL, and others.
Yet bulls think it will not impact the short-term or growth returns in any way.
Lastly, Netflix can grow more in the international market. Due to the brewing interest, OTT’s popularity is now cracking the roof.
That also means Netflix can penetrate some new markets.
As a result, there can be dynamic growth in revenues soon.
Bearish Sentiments
The new wave of competition that Netflix faces is something else. Such acute local competition was never there before.
But Netflix is not succumbing. Instead, they are exploring new revenue sources.
Yet, bears feel that Netflix must recognize threats to its primary business.
It may keep their growth investors alive. However, it will certainly impact the confidence of day traders and short-term gainers. That means you may have NFLX in your Retirement Portfolio but not in your day trading profile.
When they feel that Netflix’s revenue status in the primary market could be more steady, they will start losing faith.
If you are Building Credit from Scratch, investing in a stock you need clarification on is not advisable.
The bearish customers also feel that the US market has already reached maturity. No doubt Netflix has the lion’s share of business there. However, there is no scope for increasing revenues from the market unless Netflix announces another price hike.
Conclusion
Netflix is a valuable stock if you ask me. But bullish investors consider it an outstanding growth stock, too. On the whole, it is a quality stock.
Is Netflix a good stock to buy now?
Yes!.
Is Netflix an excellent stock to buy for later?
Maybe not!
Hints suggest that competition will be fiercer later. However, Netflix has always come back stronger. It all depends on the success of their advertisement-based revenue model. When Netflix’s stock creates a new market position, under suitable market conditions, Netflix may become as valuable again.
At the same time, NETFLIX is overvalued. It means that investor interests are held high. That might be a factor in helping Netflix maintain a reasonable buy-in.
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