Netflix Stock: Should You Buy, Hold or Sell?
As we’ve collectively navigated the COVID-19 pandemic, we’ve sought comfort wherever we could find it — and we’ve found a lot of it on Netflix. As people went into lockdown in the first quarter of 2020, the digital streaming service added 16 million new subscribers. Netflix’s stock price surged 27% over a 12-month period.
More than a year later, investors have reason to wonder if Netflix will remain a growth story?
A Market Leader, but Still on the Rise
It would probably have been unrealistic to expect Netflix to top the growth it saw in early 2020. Although the company added four million new subscribers in the first quarter of 2021, it landed at 208 million total subscribers — two million shy of its goal. Netflix’s first quarter revenue was $7.16 billion, an increase of 24.2% compared to the first quarter of the previous year. Overall revenue reached about $25 billion in 2020. At present, its market cap, or estimated value, is somewhere between $166.71 billion and $242.63 billion.
Google’s stock price as of Jun. 28, 2021.
An Intensifying Competitive Climate
Four million new subscribers in the first quarter seems like good news, but some industry analyses have noted that Netflix could be losing some of its foothold in the streaming marketplace.
A recent report revealed that in the first quarter of 2021, Netflix’s market share for streaming of original digital content sat at about 50% compared to 64.6% two years ago. In the U.S., the company fell below 50% for the first time. Another industry study showed Netflix’s share of U.S. subscribers down 31% in one year.
That shift is likely due to the growing competition in the digital streaming space as rivals like Disney+, Paramount+, NBC Universal’s Peacock, WarnerMedia’s HBO Max, Discovery+ and possibly even Roku roll out new offerings and challenge Netflix’s lead.
Netflix Stock: Newly Vulnerable or Historically Volatile?
After Netflix released its first-quarter earnings, its stock price tumbled by 11%, to $489.28. It has since enjoyed a rebound that restored it to a trading price of more than $500 per share.
Analysts have noted that Netflix stock has been somewhat volatile over time. In the decade leading to a 2018 analysis, Netflix stock was noted to have dropped at least 10% more than 13 times. Five of those drops were more than 15%.
Good To Know
Although Netflix has been slowed down by production delays related to COVID-19, it plans to spend more than $17 billion on content in 2021. The company has also inked a deal with Steven Spielberg’s company, Amblin Entertainment, and is believed to have production plans for 60 movies this year.
Netflix won seven Oscars at the 2021 Academy Awards, growing its overall collection to 15. An analysis from Nielsen indicates that Netflix is delivering enough value for its customers to consider a fresh hike in subscription prices.
Netflix Stock: Buy, Hold, or Sell?
Should you invest in Netflix –green light, proceed with caution–yellow light, or hit the brakes–red light? According to CNN Business, 45 analysts rank Netflix as a buy — in other words, a green light.
Although several competitors aim to challenge Netflix’s dominance, it remains the clear market leader in the rapidly growing digital streaming sector. On top of that, it’s investing in itself, making content bets that are likely to add value for consumers and investors alike.
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- CNN. 2021. "Netflix's Subscriber Growth Slows as Vaccinations Ramp up and Rivals Gain Strength."
- Reuters. 2021. "Netflix Subscriber Growth Slows After Pandemic Boom."
- MacroTrends. "Netflix Revenue 2006-2021."
- Bloomberg. 2021. "Netflix Is Losing Market Share. But Is It Losing Customers?"
- MarketWatch. 2021. "Netflix Inc. Stock Outperforms Market on Strong Trading Day."
- CNBC. 2021. "Netflix Snags 7 Awards, Nearly Doubling Its All-Time Oscars Tally."
- CNN. "NFLX - Netflix Inc Forecast."