Netflix’s [NFLX] share price has had a fairly pedestrian end to November. Trading flat since the start of the month, the streaming giant hasn’t had a must-watch show or outstanding earnings to improve its rating.
But any speculation that Netflix’s share price is in trouble might be a bit hasty. After all, stocks shouldn’t be discarded like a television box set that’s entering its meandering third season. And in Netflix’s case the outlook remains positive, with several analysts having share price targets well north of $700.
What’s happening with Netflix’s share price?
Netflix’s share price surged in the middle of the month after the streamer unleashed stoking third quarter results. Between 10 November and 17 November, Netflix’s share price gained 5.5%, to reach an all-time high of $700.99 in intraday trading. From that point investors seem to have turned off the stock, which closed Friday at $665.64.
Netflix’s share price muted end to November could represent a buying opportunity. It’s also worth bearing in mind that the stock gained 1.12% on Friday 26 November and could be a beneficiary if the latest COVID-19 variation Omicrom results in a return to lockdown measures.
Growth drivers for Netflix’s share price
Netflix’s share price has benefitted from the streaming service’s ability to fend off rivals. A couple of years ago there were doubts about whether Netflix would maintain its market share as Disney+, Apple TV, HBO Max, Hulu, Amazon Prime and more looked to mooch in.
Yet competitors have struggled to match Netflix’s sheer ability to generate buzzworthy international content that can engage audiences like Squid Games or The Crown. Sure, Disney [DIS] has Marvel and Star Wars, but anything that isn’t a franchise spin-off has failed to catch fire.
“We remain somewhat skeptical that more Star Wars/Marvel/animated/family content will be sufficient to grow the Disney+ audience out to parity with Netflix” - Cowen analyst Doug Creutz
“Lupin”, the French heist series was watched by 76m in its first 28 days on the streaming platform. South Korean horror “Hellbound” recently topped “Squid Games” as the most-watched show on the platform, topping ratings in 80 countries 24 hours after its debut.
Cowen analyst Doug Creutz threw some shade on the ability of Disney’s content lineup to compete with Netflix earlier in November, reports The Hollywood Reporter.
“We remain somewhat skeptical that more Star Wars/Marvel/animated/family content will be sufficient to grow the Disney+ audience out to parity with Netflix.”
Netflix spends big on producing original content. In its fiscal 2021, the streamer spent $17bn on content, a substantial increase from the $11.8bn in 2020 and $13.9bn in 2019.
Of course, the sheer size of Netflix’ s subscriber base means its shows have more chance of getting more eyeballs on them. Netflix had 209m subscribers at the end of the second quarter, topping Disney+’s 116m and Apple TV which was thought to have less than 20m subscribers as of 1 July, according to CNBC.
In the third quarter, Netflix lumped on 4.4m more subscribers for a total of 214m paid subscribers. For the fourth quarter, the streamer is forecasting a net add of 8.4m. By the middle of the next decade the streamer is predicted to have around 400m subscribers based on their current subscriber growth rate of 15%.
Expected Netflix subscriber numbers by the middle of next decade
Netflix position of strength comes from its core place among other streaming services that are now essentially replacing cable for many. At least that’s the view of Middlefield Capital manager Shane Obata speaking to BNN Bloomberg earlier in November.
“Lots of younger people don’t have cable and probably never will, so I think over time it will eventually shift to a point where we all have various streaming packages. And I think Netflix is the one that sits at the core of that,” Obata said.
Obata isn’t the only one who is bullish on Netflix’s share price. JP Morgan’s Doug Anmuth believes that the last three months of 2021 will be Netflix’s ‘strongest quarter ever’. The analyst sees an additional 8 8m net subscribers being added and notes the streamer’s relatively low penetration in Asia-Pacific as an opportunity. Anmuth has an Overweight rating on the stock along with a $750 price target - a 12.8% upside on Friday’s close of $665.64.
Another bull is Key Blanc’s Justin Patterson recently upped his price target on Netflix from $690 to $725. Like Anmuth, Patterson believes Netflix should see strong subscriber numbers compared to its peers. Investors might want to tune in for more gains.