Netflix Stock (NFLX) Bears Are Wrong Again
Anyone with a Netflix, Inc. (NASDAQ:NFLX) membership will likely tell you how invaluable they find the service. However, analysts are completely divided in their opinions of Netflix stock (NFLX), which is why shares have been on a roller coaster ride through the years.
Some of the bearish analysts believe that NFLX stock has run its course. They think Netflix stock is finished. Their expectations of the stock are nearly always wrong.
If you doubt that, rewind the calendar to June 2011.
NFLX stock was trading at roughly $38.00 at the time, but then-CEO Reed Hastings proposed splitting the company’s delivery and streaming services into two separate entities. Remember the Netflix delivery service? Order movies online and they would drop them off at your doorstep? It’s what put Blockbuster L.L.C. out of business, and it was Netflix’s bread and butter.
But, being the media mogul that he is, Reed Hastings sensed the tectonic shifts that would later come to pass. He knew that people would rather press a button to watch whatever they want than wait for a DVD to be delivered. It makes complete sense in retrospect.
But most analysts didn’t understand his vision at the time. The delivery service was a crown jewel, worth its weight in gold, as far as they were concerned. Hastings was overreaching, they said.
The backlash to his proposal was so severe that NFLX stock sank to $8.21 in just 12 months.
Hastings was forced to delay his grand schemes until markets were prepared to receive them, which did happen eventually. Never mind that analysts misread the signs. Never mind that they cost NFLX stock nearly 80% of its market value. Once consumers clamored for the streaming service, all was forgotten. Analysts were struck with a sudden bout of amnesia.
They turned bullish on NFLX stock once more, driving the share price to $68.23 by the summer of 2014. At this point, analysts were starting to get hungry for profit growth. Hastings tried to tell them that profit growth wasn’t the main priority at the moment: original content was.
Original shows—like The Crown, House of Cards, and Orange is the New Black—are what would keep Netflix users addicted to the service. Brand loyalty is a thing of the past. It would take a ton of exclusive must-see television to bind users to the Netflix streaming service.
But the same bearish analysts that were mistaken about the delivery-streaming split were bearish once again. They couldn’t comprehend the need for so much original content, because Netflix was far and away the market leader. Never mind that Amazon.com, Inc. (NASDAQ:AMZN) dedicated $3.0 billion to its own streaming service. Never mind that Hulu, LLC was nipping at Netflix’s heels.
The short-sighted Luddites managed to drive NFLX stock down 30% during the autumn of 2014.
But common sense prevailed eventually; Netflix stock rebounded with a vengeance. It reached a peak of $123.33 in 2015. For the first half of the year, analysts frequently cited NFLX stock as one of the biggest winners on the stock market. They even made up an acronym known as “FANG” to denote Facebook Inc (NASDAQ:FB), Amazon, Netflix, and Google (now Alphabet Inc (NASDAQ:GOOG)). These tickers became the hottest commodities in finance.
But, like clockwork, analysts exhausted their optimism on Netflix stock. They promptly turned 180 degrees on the company, which led to a considerable amount of panic. Investors took one look at the dire warnings issued by these “respected” analysts and what do you think they did?
They ran for the hills, of course.
It’s no surprise that NFLX stock fell to $90.00. But I had caught on to this pattern by then. I wrote report after report warning investors not to fall into the bear trap. Anyone who followed that advice would have made a killing by now, because, sure enough, Netflix stock is back at $125.89.
According to the pattern that manifests every other year, NFLX stock is due for a major bounce in 2017. There’s a very good chance it could soar past $200.00 a share, so investors can likely ignore the Netflix stock bears who have been wrong time and time again. This stock is a proven winner.