Netflix Stock (NFLX): Is It A Good Buy?

Last Updated March 11th 2022
4 Min Read

From its humble beginnings as a DVD by mail service, Netflix has grown into a behemoth of the global video streaming services space. Netflix realized the potential of video streaming early and transitioned to a subscription-based model, with its revenue growing exponentially since the transition, shooting up from $1.36 billion to around $25 billion in a little over a decade.

Regarding subscriptions, the growth has followed a similar trajectory, surging to around 214 million in 2021. The Netflix stock had surged to its all-time high on October 1, pushing to nearly $700 but has since dropped off almost 50%. Let us understand if the NFLX stock is a good buy in 2022.

Netflix Is A Market Leader

Excellent potential for growth makes NFLX one of the top stocks to buy in 2022.

While the Netflix stock price has dropped considerably since its heady highs towards the end of 2021, short-term drops are often considered excellent opportunities to buy, especially if the company is well established in the market and has significant potential for the future, which Netflix has in abundance. Netflix has a considerable advantage over other streaming platforms, and that alone is reason enough to buy NFLX.

Netflix also has a first-mover advantage, has been able to spend aggressively on content, and has an excellent execution strategy. Netflix also has considerable market presence and visibility and is usually the first streaming service individuals would choose to buy, managing to stay ahead of its competition, making NFLX an attractive option for investors.

There Is Room For Growth

A drop in stock price but a growing user base is enough reason to invest in NFLX.

Numbers don’t lie, and while reports of a slowdown in subscriptions have spooked investors, a closer examination reveals that all is not lost, far from it. In Q3 of 2021, Netflix managed to add 4.4 million new subscribers. This figure was considerably higher than the predicted 3.5 million subscribers it was hoping to add. In contrast, Q4 saw a marginal drop, with 8.3 million new subscribers against the predicted 8.5 million. The slowdown rattled investors, resulting in a considerable drop in stock price. However, looking at the bigger picture, the 8.3 million new subscribers take subscriptions to over 221 million, representing an increase of 8.9%, year over year, with year over year revenue also increasing over 16%. The numbers show that NFLX stock is a good buy if you are looking for a long-term investment.

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An Attractive Valuation

Netflix is seeing its revenues grow fairly quickly, positively impacting the stock price.

The Netflix stock price registered a considerable drop following the announcement of its earnings report. As Netflix continues to grow, we can expect to see slower but consistent growth. The platform still has a huge opportunity to grow internationally. Netflix ended 2021 with a negative $154 million in free cash flow and is expected to produce positive free cash flow in 2022, indicating that the company has reached a solid financial footing. Remember, Netflix still has a large addressable market, which means it retains the potential to accelerate its subscriber growth again, making the NFLX stock a great buy in 2022.

Is The NFLX Stock Overpriced?

While the stock did reach highs in 2021, recent valuations could represent a buying opportunity.

Netflix had a fairly good performance in the market in 2021, far outperforming its peers and seeing a cumulative growth of around 16%. Competing stocks saw much worse returns. While the beginning of 2022 has seen the stock price drop, moving away from its peak, there is room for the price to rebound and push higher. This growth potential is another factor that boosts the investability quotient of NFLX.

Is NFLX A Good Buy?

Based on the Netflix price prediction and technical analysis, it is evident that the stock will perform better in the long run. The successful execution of the business will undoubtedly result in an overall increase in the value of Netflix.

NFLX can potentially rebound in 2022, with the company expected to produce positive free cash flow this year. The platform is also looking at breaking into previously untapped markets. CNN Business has stated that the consensus rating between 46 analysts is that the NFLX stock is a good buy, with the price expected to push to around $550 sometime in Q2 2022. 

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