As the world’s largest streaming company, Netflix has over 167 million subscribers worldwide. If you’re thinking of buying some Netflix stock, check out our guide below to know what platform you should sign up for.
Who would have imagined that legendary actress and ex–wife of cable TV magnate Ted Turner would help a streaming media company called Netflix replace the cable networks. Jane Fonda’s series “Grace and Frankie” is the longest running of the popular Netflix Originals series. As viewers disconnect from their high monthly cable subscriptions to watch unlimited streaming movies and shows on Netflix, Turner programs, Disney shows and HBO hits are racing to become streaming services like Netflix.
As the world’s largest streaming company Netflix becomes a premium content producer, this guide will look at how to value Netflix stock, find the best Netflix stockbrokers, and assess how an onslaught of new competitors will affect the stock value long term.
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2. Stash Invest – Best Stock Broker for U.S and Canada
If you are looking for an all-in-one investing and banking solution without high banking fees, Stash Invest cuts out unnecessary charges. You can get started investing in Netflix stock with the Beginner plan for $1 a month. The Growth plan ($3/month) includes retirement accounts and the Stash+ ($9/month) plan investment accounts for kids and a Metal card with extra stock rewards. All plans include a debit card with Stock-Back® rewards and a 2-day payroll advance. Unused cash in your brokerage account is automatically transferred into your savings account to earn interest.
To keep investing simple, Stash Invest provides a choice of 450 stocks and ETFs. If the price of Netflix shares, currently trading around $446 a share, is too steep, you can buy shares starting at $5. Fractional shares make it easier to build a diversified portfolio. Stash Invest has kept the beginner investor in mind. Step-by-step lessons in investing, trading and financial planning are available to help you get the most out of your investment and banking accounts.
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Should I Buy Netflix Stock – Points to Consider
Before deciding whether Netflix stock is a buy or sell, you should consider the company fundamentals, along with historic price movements and forecasts.
Netflix business model and share price history
Netflix’s streaming media model is copied by the biggest media entertainment companies in the world. Netflix used to pay companies like Time Warner, Walt Disney and CNN big bucks to stream their content on its video streaming app. But in 2013, starting with the blockbuster “House of Cards,” Netflix started to make its own original shows, Netflix Originals. The rest is history, as they say in show business. Without the large content expenses, Netflix’s profit margin started to expand and hit a record 9.3 percent in 2019.
Targeted entertainment with big data – The studios are coming! Disney, AT&T WarnerMedia, Comcast and Apple all launched direct-to-consumer streaming in 2019–2020. These content partners have watched Netflix shares increase 500 percent in value since its first Originals series was launched. Netflix keeps winning more Emmy and Oscar nominations than other content houses. A key advantage of Netflix’s early lead as a digital video provider is the proprietary marketing analytics that have been the engine of business growth since the early days. Netflix has two decades of data on streaming media subscriber preferences and uses it to target and produce popular content.
Netflix Originals – Netflix made a bold bet on becoming a movie studio when its profit margins collapsed in 2012. Last year, almost 40 percent of viewing on Netflix was of original content. And crucially, Netflix holds the rights to future revenues on the releases, advertising and product sales – not the big studios. New engagement techniques like interactive programming allowing viewers to choose the ending is increasing viewership. Netflix’s proprietary marketing analytics tools tells it with impressive accuracy whether or not a show will be a hit with viewers.
Content rights with benefits – Producers of movies and TV shows typically sell their content for 60 to 70 percent of production costs plus rights to a percentage of future revenues, according to industry pub Variety. Netflix pays content producers all of the production costs plus 30 percent. Netflix then retains the rights to future revenue, including from advertising and product sales. This pay package has attracted big producers like Ryan Murphy and Shonda Rhimes.
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Netflix stock performance
Netflix has a three-year trailing stock return of 42.5 percent versus 5 percent for the media entertainment industry. This is one stock benefiting from the global coronavirus confinement as more people stay home and watch streaming media. The stock’s year-to-date return is 27.8 percent
whereas the group of FAANG (Facebook, Amazon, Apple, Netflix, Google) stocks is up 6.3 percent so far this year, find out more about how to buy Apple stock.
Netflix has an astronomically high price-to-earnings (PE) ratio of 96. Its new streaming media competitors AT&T WarnerMedia (HBO Max), Comcast (Comcast Peacock newly launched in April with free and ad-supported offers) and Disney (Disney+) have much lower PEs of 8.7, 12.4 and 19, respectively. Is the market fairly valuing Netflix, or are investors mixing reality with fantasy from Netflix’s dystopian sci-fis? Let’s take a closer look. Netflix is investing a lot of money on its original content. In 2019, the company’s content spend was $15 billion. Netflix’s return on invested capital (ROIC) is 16.8 percent, versus the 6–7 percent range for the above competitors, indicating it generates significantly higher returns on its content spend than it costs to raise the capital.
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Netflix stock dividend information
Instead of paying dividends, high growth companies return value to shareholders in the form of increases in stock value. Over the last 10 years, Netflix stock has had an average annual return of 40.4 percent compared to 10.9 percent for the S&P 500 with dividends reinvested.
Netflix stock forecast and outlook
Over the next five years, the streaming media market will become more crowded. Investors deciding whether to invest in Netflix should consider Netflix’s first mover advantage in streaming. As new competitors enter the streaming price wars, 20 percent revenue growth is expected to remain flat in 2020 and ease 2.6 percent to 18.30 percent in 2021. Earnings growth forecasts, however, are strong. Earnings per share is forecast to grow almost 200 percent to 8.4 in 2021. Higher subscription rates and falling content costs will improve profitability. Here is how we see Netflix increasing its earnings power over this forecast period.
2020 – Higher subscription prices
Even while Netflix raised U.S. prices across its U.S., Basic, Standard and Premium plans in 2019, the number of paid worldwide subscribers was up 8.8 million in Q4 to 167 million. As new streaming competitors increase their content, Netflix expects some churn with 7 million new subscribers in the first quarter of 2020. International subscribership growth is robust, and comprises 64 percent of subscribers. Netflix’s U.S subscribership growth was a more modest 550,000. The lower numbers reflect subscriber churn to the new streaming media services, including ad-supported competitors such as Tubi, Roku, and Crackle. Mobile-only services successfully launched in India will be expanded to other countries this year. Analysts’ median Netflix forecast is for a median stock price of 401, with a low of 173 and a high of 487.
2021 – Animations
Netflix is seeing a gradual increase in migrations to its Premium plan driven by smart TVs, which will help offset some of the subscriber churn. The entry into “box office Disney” level animations will help further increase premium subscribership. Disney+ is beginning its European expansion, although Netflix says the Mickey Mouse house will compete more directly with TV. Netflix’s release of “Klaus” in Q4 2018 was a huge box office success and garnered an Oscar nomination. With two more animated features coming out in 2020, including “Over the Moon” from the producer of “Little Mermaid“ and “Beauty and the Beast,” by 2021, Netflix should have a fuller content library of animations. Low-to-median Netflix stock growth is forecast.
2022 – International co-productions
Netflix is focused on producing higher quality productions that will be more popular with its members. Netflix had the most nominations at the Oscars this year. The more prestigious awards it wins the easier it will be to secure premium content. At the same time, the streaming company is choosing lower cost content production paths. As expenses ease up in higher scale films, original series and local language series, Netflix is moving towards becoming cash flow positive. Netflix has a big push internationally on co-productions, which are set to more than double from 140 in 2018, another way to lower programming costs. Median-to-high Netflix stock growth is forecast.
2023 – Streaming over TVs
Over the next five years, more subscribers could access Netflix through TV bundles than standalone subscription packages. Netflix is securing itself a place in TV bundles by packaging itself in more marketing savvy ways. The Sky Ultimate TV package bundles Sky and Netflix shows into one €30 package for new members in Europe. The bundle provides added value and customer stickiness against, say, the separate Disney+ package for its standard €6.99, also recently added to the Sky TV options. Sky also bundles the upgrade to Ultra HD and Netflix Premium together. Median-to-high stock growth is forecast.
2024 – Streaming competition
Over this forecast period, video streaming is expected to grow at a compound annual growth rate of 18.3 percent reaching $149.3 billion by 2026. The increase in mobile phones and faster internet networks will spur this growth. The new entrants in 2019 will be more formidable competitors but will not necessarily cause high customer churn for Netflix. About 37 percent of users of online streaming video services subscribed to two or more services in 2019, up from 10 percent a year ago, indicating that the market will spend money across more services. Netflix Originals could grow from 50 percent to 75 percent of expenditures. As this happens, content expenses will fall and Netflix‘s earnings power will continue to strengthen. Median-to-high stock growth is forecast.
How to Buy Netflix Stock from eToro
Assuming you have a funded account, below are the simple steps to take buy Netflix stock.
Step 1: Search for Netflix (NFLX) Stock
Step 2: Click on trade
Step 3: Specify ‘Buy’
Specify ‘Buy’ on the top tab, change the leverage to X1 to purchase real stock and proceed to set your order. And if at this point you haven’t put money into your account, you’ll be prompted to do so.
Investing in Netflix Shares – Final Thoughts
Undeniably, Disney is not the only streaming service with content magic. Netflix had an impressive 117 Emmy nominations and more Oscar nominations than any other media company last year. Netflix’s proprietary marketing analytics — the engine of business growth since the early days — are consistently helping to develop winning content. This marketing intelligence is a first mover advantage for Netflix, and a good reason to buy NFLX shares.
When you are ready to buy stocks, we recommend doing so via a regulated online broker such as eToro if you’re a UK customer, and Stash Invest for U.S. customers. You’ll be able to buy Tesla Stocks as well as a host of other options.
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What is the most downloaded video streaming app?
Netflix was the tenth most downloaded app in 2019, and the most downloaded video streaming app, followed by Hulu and Amazon Prime. Disney+, HBO Now have quickly become top apps.
Is Netflix still in the DVD rental business?
Netflix has been renting out DVDs by mail since its founding in 1997 from www.netflix.dvd.com. Netflix DVD rentals has about 2.7 million subscribers and generates over $200 million in revenues a year.
Is Netflix expected to grow subscribers while facing new competition?
An estimated 528 million people will subscribe to SVOD services by 2025. Netflix is forecast to have a 45 percent market share, followed by Amazon Prime (26%), Disney+ (19%), HBO Max (5%) and Apple TV+ (5% ). (Statista)
Where and how can you buy Netflix stock?
You can buy Netflix stock from online stockbrokers. eToro.com and Stash Invest are examples of online broker platforms where investors buy and sell Netflix stock. After signing up online, type in the NFLX ticker, place your order and you will become an owner of Netflix shares.