- Netflix has had a meteoric rise in terms of stock price and subscriber numbers.
- As the industry leader, Netflix has opportunities to explore other media types.
- Their huge content library and award-winning in-house shows makes Netflix very challenging to beat.
Netflix (NASDAQ:NFLX) grew as a brand through offering an a-la-carte dvd rental service. As Youtube grew, broadband speeds increased, and consumers found it more convenient to stream high definition video content, Netflix was one of the first companies to lead the way. At this moment in time, Netflix has more than 57 million customers and a stock price which has grown by around a 1000% over the past 3 years. Notably, the streaming giant has a free cash flow which is a quarter of a billion dollars in the negative (Q3); nevertheless, interest in the stock has never been higher.
Let's delve into why Netflix stock is one of the hottest tech stocks of this year, and why long and short investors are adding it to their portfolios.
Netflix has a content library which is arguably one of the best out of any streaming platform. And this is a key factor in their stunning rate of user acquisition. Interestingly, it is yet to fully enter the lucrative Asian market. As with any product, build it well, market it well, and people will come. Netflix isn't satisfied with merely buying the rights to other people's content. Shows such as House of Cards and Marco Polo have powered the streaming giant to an impressive 34 Emmy Awards and 57 million paying subscribers. In comparison, Hulu's subscriber figure stands at 8 million (approx).
Netflix has spent millions of dollars in advertising and this has spurred their growth and placed them as a market leader. A survey by RBC capital markets shows that half of American are Netflix users. This is impressive, considering that Netflix doesn't have a free tier like Spotify.
The insatiable demand for Netflix globally shows that it isn't just an add-on to standard television, but could be the next iteration of how we consume movies and tv shows.
The huge number of paying subscribers that Netflix has is partly the reason why investors are getting so excited. Netflix could easily offer more services such as live sports streaming, music, and even PPV at a later date. This will add considerable revenue and allow investors to enjoy big returns. And with their aggressive actions towards rapidly bringing their product to a global audience, it seems like that is all part of the masterplan.
In order to appreciate the health of this company, one need not look any further than the S&P 500. Netflix has increased by more than 153%, as compared to the S&P 5o0 (1.5%), from the beginning of this year till now.
Unfortunately, Netflix fell below expectations for its Q3 results. Notably, revenue was $100 million below expectations, coming at $1.74 billion, and earnings per share came in at $0.07, when analysts anticipated $0.08. This caused a temporary slump in the stock price.
In conclusion, Netflix continues to break new boundaries, reach new markets, and continually develop in-house content. However, the greatest growth opportunity for Netflix is in potentially offering live television, and expanding into other media types, i.e. gaming.
The future is looking bright for Netflix and eventhough competitors continue to spring up, the baton is firmly in their hands.