This article will show you why you should buy Netflix stock and all you need to know about Netflix stock’s fundamentals. Your understanding of this analysis will guide you to make good buying decision about Netflix stock.
What is Netflix Stock?
Netflix stock is your avenue of becoming a shareholder in Netflix Inc. you can buy shares of stock in Netflix to diversify your portfolio and make good profit in both short and long term.
The Netflix, Inc. is an American payment issuing service and production company that was founded on August 29, 1997. Netflix Inc. offers a film and television series public library through dissemination deals as well as its own creations, known as Netflix Originals.
It was founded by Scotts Valley and others with headquarters in California, United States. The company was listed in the exchange on May 29, 2002, selling 5.5 million shares of common stock at US$15.00 per share at IPO with ticker symbol-NFLX. And as at 22/04/22 it was valued at $216.2 per share −1.95 (0.89%).
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Netflix is one of the original FANG stocks, a quartet of large internet establishments that mirrors the control of technology stocks on U.S. markets. The others are Facebook, Amazon, Google-owner of Alphabet, and Apple.
Where is Netflix Traded?
The ticker symbol for Netflix is NFLX. The company is traded on the NASDAQ in the US. NASDAQ trading hours are 2.30pm – 9pm (UK time) Monday to Friday. So the operation hours are normal government’s working time.
Netflix Stock Fundamentals
In the last quarter of 2021, Netflix boosted 8.28 million issuing subscribers, just missing its goal of 8.5 million. However, it edged above Wall Street’s target of 8.23 million new subscribers.
In the first quarter of 2022 quarter, it projection added 2.5 million new subscribers to the agreed estimate of 5.8 million as net addition in the same first quarter.
Netflix earned $1.33 a share on sales of $7.71 billion in the fourth quarter of 2021. On a year-over-year basis, earnings rose 12% while sales climbed 16%. Analysts had projected earnings of 83 cents a share on sales of $7.71 billion.
For the first quarter, Netflix said it expects to earn $2.86 a share on sales of $7.9 billion. That would translate to a 24% drop in earnings year-over-year on a 10% increase in revenue. Wall Street analysts are predicting Netflix earnings of $2.90 a share on sales of $7.93 billion, according to FactSet.
Analysts also expect Netflix to add 2.5 million new subscribers in the first quarter of 2022 as a measure of the company’s target. Netflix’s first-quarter earnings report on April could be the resulting spring-up for NFLX stock.
Usually, Netflix adds roughly 8.4 million subscribers in the first quarter, including cancellations which reflect the average in the first quarter looking at the position in 2017.
Management has set the bar much lower this year 2022. Netflix guided investors to look for additions of just 2.5 million in Q1 of this year, which is 5.9 million below its historical average.
The depressed expectations make it more likely that Netflix will exceed those estimates. In any case, if it reports less than the 2.5 million figure, that could trigger further selling of Netflix stock all things being equal.
Why Is Netflix Stock Dropping So Much?
The stock is down 62% this year 2022 including last week’s significant drop. We notice that users clustered to Netflix prior to the months of the coronavirus pandemic which caused lockdowns and sit-at-home measures to tackle the virus, sending the company’s share price to record high.
Over the last several years, Netflix has deviated from its focus on growing its global subscriber base abandoning its usual ways of investing heavily in local-language original content production worldwide.
Netflix stock progressive performance over the past years is associated with its net subscriber additions. Netflix ended the last quarter of 2021 with 221.8 million subscribers worldwide due to the coronavirus pandemic.
The U.S. and Canada accounted for 34% of its total subscriber base because Netflix stock has profited from the gradual cancelling trend as people quit traditional pay television services.
Consumers watched more television because movie theatres, live music and sports were shut down during the pandemic. But Netflix subscriber gains have dipped as the economy reopens following the pandemic measures relaxation across the world.
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Netflix shares dropped to a more than four-year low; which is its lowest since shares closed at $220.46 on Jan. 19, 2018 after the company mailed a first quarter loss of 200,000 subscribers and projected that it will lose another 2 million subs in second quarter.
Easing of restrictions and an increase in competition from other streaming services over the past year has presented hurdles to Netflix’s growth. What Netflix must do is to diversify investment to contain the raging competition and strives to increase earnings.
Is Netflix a good investment?
Of course, analysts developed a computational mechanism which shows that Netflix, Inc. (NASDAQ: NFLX) ranks 15th on a list of the 30 Most Popular Stocks among Hedge Funds.
NFLX was in 106 hedge fund portfolios at the end of the third quarter of 2021, compared to 113 funds in the previous quarter. This popularity rating will help attract subscribers and investors to the company.
Could Netflix be a Good Buy in the Coming Weeks?
Netflix is having a bumpy time in the first quarter of 2022. This is due to a number of factor regarding economy’s reopening and making the stock to down by over 40%.
It parades over 222 million paying subscribers, while The Walt Disney Company is the only other one that claims over 100 million. In effect, Netflix’s 222 million subscribers created roughly $30 billion in revenue in 2021, and now heading for more in 2022.
The massive scaling-up gives Netflix an edge over other competitors and even in 2021; it spent $17.7 billion on content, $6 billion more than in 2020.
Netflix’s current market cap is $159 billion. Add on $15 billion in debt and deduct $6 billion in cash, and it has a market value of $165 billion.
With $6.2 billion in operating income in 2021, that gives the stock a trailing initiative value-to-operating-income of 26.6, right around the market average. If Netflix can continue growing its top line while also gaining operating advantage, investors should expect this earnings expansion to come down over the next few years.
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As the stock’s realistic earnings moves exponentially, we hope that Netflix can be a good buy if investors are confident that subscriber growth will continue to grow worldwide and that Free Cash Flow per share will finally converge with operating revenue.
How to Buy Netflix Stock – Easy step-by-step-guide
Once you are ready to buy shares in Netflix, log in to your investment account or trading app. Type in the ticker symbol NFLX and the number or volume of stock you want to buy, or the amount of money you desire to invest.
To buy Netflix stock, you must follow six steps below:
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Compare share trading platforms:
Use our comparison table to help you find a platform that fits you. This means you must look for a reliable and sincere online broker.
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Open your brokerage account:
You must open an account with the broker. The account is called investor’s trading account.
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Complete an application with your details:
You will provide your information in the form as required by your broker. ID card and bank statement may be needed.
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Research the stock:
You must do a research about the Netflix stock to know the market situation and other fundamentals before you make a buy decision.
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Purchase now or later:
Confirm you payment details and choose the option to purchase now or later depending on your plan. If you wish to buy now, then click ‘buy now’.
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Check in on your investment:
You are required to visit the platform to check out for the performance of your stock at regular interval.
