Netflix is a pioneer in streaming. Founded in 1997, it has revolutionised how people watch TV shows and movies. Today, Netflix has a vast library of content, including original series, movies, documentaries, and more. It currently has 277 million paid memberships and operates in over 190 countries.
The streaming giant was initially known for its convenient DVD-by-mail service and then transitioned to become the world’s leading streaming platform. The company has also moved to now offer games via its platform.
Netflix’s current co-CEOs are Greg Peters and Ted Sarandos. The company trades on the Nasdaq stock exchange under the ticker symbol NFLX and is included in the S&P 500 index and Nasdaq 100.
YOUR CAPITAL IS AT RISK
Netflix EPS and Revenue Breakdown 2020-2023
| NFLX | Annual EPS | Annual Revenue |
|---|---|---|
| 2020 | $6.26 | $25.00 billion |
| 2021 | $11.55 | $29.70 billion |
| 2022 | $10.10 | $31.61 billion |
| 2023 | $12.25 | $33.72 billion |
Entertainment and Technology Industry Comparison
Netflix Chart
After tumbling at the end of 2021 and at the beginning of 2022 following the loss of a significant number of subscribers in the first six months of the year, Netflix shares regained most of their losses. A password-sharing crackdown and the introduction of an ad tier has helped reinvigorate subscriber numbers.
P/E Ratio Average Over the Last Ten Years: 125.16 (Source: FullRatio)
Netflix Share Price Forecast
According to data compiled by TradingView, out of 51 analysts covering Netflix, 32 have a Buy rating, 17 have a Hold rating, and two analysts have a Sell rating on the streaming company’s shares.
While analysts at Benchmark raised their price target on Netflix to $450 from $440 in a recent note, the firm kept a Sell rating on the shares. They acknowledged that Netflix management continues to execute well. However, at the time of the note (May 17, 2024), the firm doesn’t feel the current valuation can be justified.
Jefferies is bullish on Netflix, with an analyst at the firm assuming the streaming giant with a Buy rating and lowering the price target to $655 from $700 in a recent note. The analyst is “positive” on Netflix, given his positive opinion on advertising, price hikes, and its password-sharing crackdown. He added that there could be a 15%-plus upside to the stock based on a five-year compound annual growth rate for revenue of 10%-plus.
Our View: For investors focused on big-name stocks with the potential for further growth, Netflix could be one to assess further. Its valuation may be a factor to consider, but the company has some intriguing areas that could lead to revenue growth.
NFLX Suitability
Netflix has many qualities that will attract different types of investors. Here are some of the characteristics investors in Netflix may require:
As with other growth stocks and tech firms, Netflix is more suitable for investors comfortable with the risks of growth stocks. A mid- to high-level risk tolerance may be beneficial. The stock can be volatile due to factors like subscriber growth rates, content costs, and competition from other streaming services.
The Streaming market is extremely competitive, with various companies such as Disney, Paramount, Amazon, Apple, Comcast, and more all vying for market share. Therefore, investors who believe in the long-term potential of the streaming industry and Netflix’s ability to fend off the ever-increasing competition may find Netflix shares appealing.
While Netflix has already experienced substantial growth, it is working to continuously grow its market share and move into other areas such as games and, more recently, live sports (it recently made a move into live sports by streaming golf and tennis exhibitions, while it has also secured the rights to the Mike Tyson vs Jake Paul boxing contest). As a result, investors seeking exposure to technology companies with further growth potential might find Netflix attractive.
For investors searching for regular income, Netflix may not be the stock for you as it does not currently pay a dividend.
