Too many doom-and-gloom scenarios (or just about) have hurt Netflix, Inc. (NASDAQ:NFLX) over the past year. Surely Netflix stock has reached more than a few moments of gravity this year. After all, Netflix has dropped by some 14% year-to-date and over 15% for the past year. But should investors actually worry about NFLX stock?
The short answer is no. Netflix stock is actually performing rather well, when set against a more substantial timeline. It is actually trading within its highest historic levels. If some have felt disappointment over NFLX stock, it’s because the latter did not sustain its record high of $122.00, set on November 1, 2015. Shares dropped to $91.00 in January, rose above $100.00 on a couple of occasions, and have settled at about the current $97.00 range.
What’s Not to Like About Netflix Stock?
But really, when you consider the potential upside, what’s not to like about Netflix?
Investors are simply choosing to ignore Netflix’s international growth potential as some analysts, like Mark Mahaney of RBC Capital Markets, does. (Source: “RBC’s Mahaney Explains Why Netflix (NFLX) is One of His Top Picks, on CNBC,” TheStreet, August 29, 2016.) Profit Confidential can boast about having seen “long” on its potential without needing any special lenses, rose-colored or otherwise.
Netflix has been right to seek growth internationally. This is what the company needs, and this is what is good for NFLX stock. Its determination to succeed internationally may have caused it to proceed with more caution. Still, this is about to pay off. The streaming video content provider has conducted surveys in different markets to measure and understand online video consumption habits in different countries, as well as viewers’ satisfaction.
The results are encouraging in Brazil. Mahaney, who has a $130.00 target and an “outperform” rating, noted that 75% of respondents used Netflix, compared to 60% in the same period last year. Only YouTube drew more users. In addition, 94% of Brazilian users are “very satisfied” or “satisfied” with the service. This figure is unchanged from last year. (Source: Ibid.) These results, better than the US and UK, show that there is room for growth in several other international markets.
In addition, Netflix gains have gotten stronger in the United States, where Amazon.com, Inc. (NASDAQ:AMZN), according to analysts like Mahaney, have not hurt Netflix’s business. Still, unlike few other stocks, Netflix seems to attract bears in equal numbers to bulls. Indeed, Axiom Capital Management has a bearish outlook indeed, predicting NFLX stock to drop 18% in the next year.
Axiom analyst Victor Anthony, who just started covering Netflix, sees the competition as a major threat. Consequently, this cuts into its ability to keep up margins, let alone raise them. (Source: “Top analyst says sell Netflix on Hulu competition,” CNBC, August 29, 2016.)
Still, the bearish voices on NFLX stock are rare. The fact that Netflix has continued to grow despite greater competition demonstrates its strength in the market. The company could count over 83 million users at the end of June. That’s over 1.6 million users since March. It’s true that these growth rates were less than expected, but you have to actually have a growth rate in the first place to experience that kind of disappointment. Imagine if it had lost customers. Now, that might be just cause for chagrin. (Source: “Netflix now has 83 million subscribers, but it grew slower than ever in the U.S.,” VentureBeat, July 18, 2016.)
The Bottom Line on Netflix Stock
Netflix also gained 6.74 million users during Q1 2016, a record, after it spread to 130 new countries. It is now focusing on international growth, where it enjoys greater presence than its competitors. More importantly, it can adapt to legislations about promoting indigenous content, which will affect itself as well as any of its competition, such as Hulu or Amazon.com.
Netflix has already done that, understanding it is a key to breaking the international market. That said, in the unlikely event that the competition delivers a strong challenge, NFLX can make a for a succulent takeover morsel for the likes of Amazon.com, Inc. (NASDAQ:AMZN) or even Apple Inc. (NASDAQ:AAPL), which are both in search of content and market share.
So, as “the most interesting man in the world”’ might say, “stay bullish my friends”—at least on Netflix stock.