The Rise of a Streaming Giant
In the realm of Wall Street, trends can shift rapidly, and investor focus can quickly pivot to the next big thing. For years, the FAANG stocks – Facebook, Apple, Amazon, Netflix, and Google – dominated the market, providing substantial returns for investors who held on tight. However, with the emergence of artificial intelligence, the spotlight has shifted to a new group of market leaders, dubbed the “Magnificent Seven.” This elite club consists of Apple, Microsoft, Amazon, Alphabet, Meta Platforms, Nvidia, and Tesla.
A Lone Wolf Rises
Among the original FAANG stocks, one company has quietly outperformed its peers and all but one of the Magnificent Seven stocks – Netflix. The streaming giant, once the undisputed leader in its field, faced significant challenges after a pandemic-induced growth spurt. Decades-high inflation and tough comps led to a dramatic exodus of investors, causing the stock price to plummet by 75% between October 2021 and July 2022.
A Strategic Turnaround
Despite this setback, Netflix continued to add millions of new subscribers and increase revenue and earnings. The company made two crucial decisions that paved the way for its success: cracking down on password sharing and introducing a lower-priced tier with advertising. These moves set the stage for future growth, and the results have been impressive. In the third quarter, Netflix generated revenue growth of 15% year over year to $9.8 billion, while earnings per share jumped 45%.
A Bright Future Ahead
Recent developments suggest that Netflix has a long runway ahead. The company’s ad-supported tier has reached critical mass, with 70 million global users just two years after its debut. This has given Netflix leverage with advertisers and paved the way for its pivot to live events. The recent boxing match between Mike Tyson and Jake Paul, which drew 108 million live global viewers, was a significant milestone. Upcoming exclusive NFL games and a halftime performance by Beyoncé are expected to drive further growth.
Is Netflix Still a Buy?
Given Netflix’s remarkable performance, the question on investors’ minds is whether the stock still has upside potential. Wall Street analysts seem to think so, with Pivotal Research analyst Jeffrey Wlodarczak maintaining a buy rating and increasing his price target to $1,100, representing potential upside of 23%. While some may be deterred by Netflix’s frothy valuation, the company’s projected earnings and sales growth make it an attractive investment opportunity.
The Verdict
Netflix has proven itself to be a resilient and adaptable company, capable of navigating challenging market conditions and emerging stronger on the other side. With its strong track record and promising future prospects, Netflix remains a compelling investment opportunity for those willing to take the leap.
Leave a Reply