Netflix Stock: A Sure Long-Term Widow Stock That Will Defend Against All
Netflix Will Remain King of the Streaming Jungle
I recall nearly 17 years ago when my child was still a toddler and regular trips to Blockbuster were the norm for renting videotapes and DVDs.
At the same time, the upstart Netflix, Inc. (NASDAQ:NFLX), was challenging the status quo in the way movies were rented. The alternative offered by Netflix back then was the ability to order movies online and have them delivered to your home.
My thinking at the time was: “Why would I want to give up the regular visits with my kid to Blockbuster and the excitement of finding the perfect movie?”
Back then, Netflix stock was trading at the $1.00 level while Blockbuster was hovering above $15.00.
Later, as Internet speeds warped higher and bandwidth increased, Netflix jumped on board to another way of viewing movies—online—and thus was born the streaming age.
If you bought NFLX stock at $1.00 and are still holding it, congratulations! A $10,000 investment at that price would be worth about $3.5 million today.
Chart courtesy of StockCharts.com
After a sell-off to $233.00 on December 24, Netflix stock has rallied nearly 50%.
The price action of NFLX stock is making some investors nervous, however. The Buckingham Research Group Incorporated analyst Matthew Harrigan recently cut his rating of the stock from “buy” to “neutral,” with a $382.00 price target. (Source: “Netflix shares fall premarket after Buckingham downgrades stock to neutral from buy,” MarketWatch, March 8, 2019.)
Netflix remains the best in breed in the video streaming market, but the competition is heating up, with new entrants ready to take away market share.
The concern is the emergence of rivals such as Amazon.com, Inc.’s (NASDAQ:AMZN) “Amazon Prime,” along with Hulu, Apple Inc. (NASDAQ:AAPL), Alphabet Inc’s (NASDAQ:GOOG) “YouTube TV,” and a soon-to-be-launched streaming service by Walt Disney Co (NYSE:DIS).
Why the NFLX Stock Bullish Story Is Intact
So far, Netflix has been able to defend its market share. The company has around 139.3 million subscribers worldwide. Even after raising its monthly fees, Netflix has managed to continue to grow its subscriber base.
The company’s results suggest the enormous pricing power behind Netflix.
And given that the company continues to spend massive funds on developing and buying content, I doubt Netflix needs to be that fearful of falling into the abyss with Blockbuster.
With Netflix, Inc.’s revenue estimated to top $20.2 billion and $25.0 billion in 2019 and 2020, respectively, the company’s strong growth justifies a higher stock valuation. (Source: “Netflix, Inc. (NFLX),“ Yahoo! Finance, last accessed March 8, 2019.)
Netflix is now profitable, and if its revenue continues to accelerate higher, there is no reason to expect that NFLX stock will not trend higher in the years ahead.
In the meantime, as indicated by the volatility in December, any major selling in Netflix stock could be viewed as an opportunity.