Netflix deserves its $ 300 billion market cap
NOTetflix (NFLX) is a telecommunications company specializing in subscription streaming content. I am bullish on the stock. (See the top analyst stocks on TipRanks)
If you’re old enough, you might remember a time when Netflix was known to send rental DVDs to people’s homes.
Times have certainly changed and the company has come a long way. Just recently, Netflix’s market cap surpassed the $ 300 billion mark.
This reflects a rapid rise in the NFLX share price, which may be of concern to some value investors.
Still, the title’s growth shouldn’t be off-putting. There is plenty of data to suggest that Netflix is still a streaming superstar with the subscriber base to keep the momentum going.
A Sneak Peek at NFLX Stock
The history of NFLX stock in 2021 can be divided into two parts.
In the first part, the stock dispersed but hardly went anywhere from January to mid-August.
Either way, buyers just couldn’t seem to push the NFLX stock above $ 500 and keep it there. Maybe there were doubts that Netflix was still the best dog when it came to streaming content.
However, those doubts would soon be dispelled and the short sellers would run for the hills.
Starting in mid-August, the NFLX stock took off like a racehorse. Buyers left the $ 500 resistance level in the dust as Netflix’s stock price threatened to break above $ 700 in early November.
It’s a powerful train to stand before – and Netflix financial statistics suggest there may be more stock price appreciation ahead.
A winner at all levels
Skeptics can complain all day long, but the data just doesn’t support their point.
In the third quarter of 2021, Netflix generated $ 7.48 billion in revenue. Not only is this in line with the company’s forecast, it’s a 16.3% year-over-year improvement.
On the bottom line, Netflix earned $ 3.19 per share in the third quarter of 2021, beating Wall Street’s consensus estimate of $ 2.56 per share.
Additionally, the company’s quarterly operating margin was 23.5%, down from 20.4% a year ago.
Clearly, Netflix is moving in the right direction as the company succeeds in solving a pandemic-related issue.
“After a lighter-than-normal list of content in the first and second quarters due to COVID-related production delays in 2020, we are seeing the positive effects of a stronger list in the second half of the year,” explained Netflix in a letter to its shareholders.
The number of subscribers continues to grow
Apparently, the streaming revolution is still in full force – at least, judging by Netflix’s expanding subscriber base.
This metric might actually be more important than Netflix’s revenue or profit. After all, subscribers are the lifeblood of a streaming business like Netflix.
Fortunately, there is good news to be announced on this front. During the third quarter of 2021, Netflix added 4.4 million new net subscribers.
For comparison, the company had planned to add 3.5 million new net subscribers. With the new additions in the third quarter, the total worldwide stands at 213.6 million.
This figure will likely be old news soon enough, however. In the quarter that began in September, Netflix plans to add 8.5 million additional new net subscribers.
Part of it could be motivated by the popular Squid game series, which has been viewed by an impressive 142 million households in the first four weeks since the launch of this series.
The Taking of Wall Street
When it comes to Wall Street, NFLX has a moderate buy consensus rating, based on 24 bought, five suspensions, and three assigned sells in the past three months. Netflix’s average price target is $ 679.13, which implies a potential downside of 0.2%.
It has been fascinating – and for some investors, very profitable – to watch Netflix grow so quickly.
Yet the story of Netflix’s growth is undoubtedly far from over. The company expects to have significantly more subscribers, which should have a positive impact on Netflix’s bottom line.
Therefore, don’t assume that NFLX stock is going to be going out anytime soon. Momentum is on the rise and it is unlikely to slow down now.
Disclosure: At the time of publication, David Moadel does not have a position in any of the titles mentioned in this article.
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