After a remarkable run last fall, shares of video streaming giant Netflix (NASDAQ:) are now showing weakness and underperforming other tech companies in today's risk-averse environment.
NFLX Weekly TTM
The Los Gatos, California-based entertainment giant saw its stock fall more than 12% in the past month, losses nearly double those of Alphabet ( NASDAQ:) or Meta Platforms (NASDAQ:) for example. Since hitting a record high of $700.99 on Nov. 17, the stock, which closed Monday at $593.74, is down about 15%. This year-end drop coincides with investors' diminished appetite for high-growth tech names as the Federal Reserve begins to unwind some of its monetary stimulus with a view to raising interest rates as early as next year. , for investors interested in buying the best streaming entertainment stocks available, at a lower price. Behind our optimism, we see clear evidence that Netflix is ??outperforming other top media companies in the ongoing streaming war. Despite the current stock sell-off, Netflix's market cap is nearly the same as that of the age-old Walt Disney Company (NYSE:). Considered NFLX's biggest rival and owning a massive entertainment empire that includes theme parks, cruise lines and the newly launched streaming Disney+ service, The House of Mouse has a market cap of $264 billion after its shares gain 20% of their value. have lost this year versus Netfix's $263 billion valuation. . Netflix is ??on track to spend about $17 billion on original content this year, up 40% from last year. Even as original content spend has increased, the company has managed to increase its operating margins. Margins grew from 7.2% in 2017 to 18.3% in 2020. As of September, at the end of September, margins improved again to almost 23%. are some of the factors that keep the analyst community excited about NFLX stocks. Among 44 analysts surveyed by Investing.com, the majority gave Netflix an "Outperform" rating. the current price. JPMorgan analyst Doug Anmuth, who has a $750 price target for the stock, sees more gains for the stock as the company's global reach continues to grow. His note added:
"We remain positive on stocks based on the continued strengthening of 4Q content, greater distance from pandemic pull-forward, improvement in seasonality and potential for increased traction in APAC, where NFLX has low penetration."
Morgan Stanley, who this month reiterated his overweight assessment on the streaming giant, said in a recent note:
“Our OW rating on NFLX is based on the belief that it will scale a large, global and highly profitable streaming company. This thesis manifests itself in an expectation of approximately 30% EPS CAGR from '21E to '25E, and even faster FCF growth."
Netflix added 4.4 million paid subscribers worldwide in the third quarter and expects 8.5 million more in the three months ended December. The company has a total of 214 million paid subscribers worldwide. Another positive development that long-term investors should consider is that Netflix does not rely on debt to fuel its growth. After years of borrowing to fund production, Netflix has said it no longer needs to raise outside funding to support its day-to-day operations. The company plans to reduce debt and will repurchase up to $5 billion in shares. last year, strengthening its cash and market positions. These factors, including superior content, make the stock a good buy during or even after the current bearish period.
