Netflix, Inc. (NASDAQ:NFLX) is winning. And so is Netflix stock.
The question you really want to ask now is, after going up by so much last year, is there still upside potential in Netflix stock?
The answer is yes. And here’s why.
Netflix is Winning Big Time
Everybody knows that Netflix has been a disruptive force in the television industry. But to understand how powerful Netflix really is, let’s look at some numbers.
According to research firm MoffettNathanson, Netflix has taken a significant amount of viewers from broadcast TV. Analyst Michael Nathanson calculated that Netflix was responsible for about half of the overall decline in TV viewing in the U.S. in 2015. (Source: “Netflix Caused 50% of U.S. TV Viewing Drop in 2015,” Variety, March 3, 2016.)
The research firm said that Netflix subscribers watched CBS shows 42% less than non-subscribers. They also watched 35% fewer Fox programs, 32% fewer ABC shows, and 27% fewer NBC programs.
Given Netflix’s value proposition, this doesn’t really come as a surprise. For less than 10 bucks a month, you get access to Netflix’s giant content library anytime, anywhere as long as you have an Internet connection.
But Netflix’s success could just be a reflection of the secular shift to on-demand consumption. And traditional TV networks are also coming out with their own streaming services. How can Netflix keep its crown when competitors are jumping in the arena?
You see, over the years, Netflix has built an unrivaled amount of content. Many of its original series—such as House of Cards and Narcos—have also turned out to be huge hits.
When all of your friends are talking about the newest season of House of Cards, you might want to start watching that show (which is exclusively on Netflix) as well.
The best part is, Netflix is just getting started. This year, the company plans to launch over 600 hours of original programming, a significant increase from the 450 hours added in 2015. (Source: “Investor Events; Archived Events; Q4 15 Letter to Shareholders,” Netflix, Inc. web site, January 19, 2016.)
Note that the company also plans to ramp up production of non-English language originals, including shows from France, Italy, Japan, Mexico, and Brazil. With Netflix going almost fully global, these shows could be an attractive selling point in some of the new markets.
The Bottom Line on Netflix Stock
Recently, RBC analyst Mark Mahaney reiterated his “Outperform” rating on Netflix stock with a price target of $140.00. Compared to where the stock is today, this would imply potential upside of more than 40%. (Source: Ro, S., “Netflix only has partial control over its destiny,” Yahoo! Finance, March 4, 2016.)
Because Netflix stock went up big-time last year, there might be some pullbacks before investors start jumping in again. But in the long term, NFLX stock still has huge potential.