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Should I Watch Netflix Stock Following Its Blowout Q4 Earnings?

Netflix (NASDAQ: NFLX) has been a massive disruptor to how people consume television. While for a time it was the only big player in this space, competitors are now lining up to take a shot at the California-based company. As a result, many people wonder — is Netflix a good investment?

This article was originally published on MyWallSt — Investing Is for Everyone. We Show You How to Succeed.

 

The bull case for Netflix

Netflix released its Q4 2020 results on January 19, with new paying subscriber numbers and revenue beating expectations. The streaming giant attracted 8.51 million new global paid subscribers during the quarter, beating the expected 6.03 million additions. 

In 2020 as a whole, Netflix attracted 37 million new paying members. A large catalyst was the COVID-19 pandemic, with people spending more and more time at home. Total revenue in 2020 rose by 24% year-on-year to $25 billion thanks to the high demand. 

Growth was slow in Q3 with only 2.2 million new paying subscribers, which led to the streaming service’s price dropping by about 4.5% until the Q4 results came around. Television shows like ‘The Queen’s Gambit’, ‘Bridgerton’, and ‘The Crown’ were major hits during 2020’s final quarter and were a boost for Netflix’s user retention. 

Netflix also has a host of new content coming in 2021 to keep users happy. It plans to release a new movie each week in 2021, including ‘Don’t Look Up’, which stars Leonardo DiCaprio, Jonah Hill, and Meryl Streep.

Finally, Netflix is also looking at continuing its global expansion. A big reason for its Q4 growth in paying subscribers was due to gains in less-established markets. Of the 8.51 million new paying subscribers, 7.7 million of them were from outside of North America. 

There is plenty of potential and room for growth in key markets such as the Middle East and Southeast Asia. Netflix is investing heavily in these regions in order to bring a great content library to life. In December 2019, Netflix committed to spending upwards of $420 million on Indian content alone over a two-year period.

 

The bear case for Netflix

In terms of the obstacles facing Netflix, it no longer has such a dominant stranglehold on the streaming market. Many big names have moved over from traditional media and launched their own competing streaming services. This includes AT&T’s HBO Max, Discovery+, Amazon Prime Video, Apple TV+, Hulu, and Disney+. 

Therefore, people are going to have to pick and choose a lot more on what subscriptions they value the most. The abundance of these streaming services will also see Netflix lose out to other companies while vying for certain iconic shows and movies. 

Users in established markets have also been unhappy about price hikes in recent times. In the U.S., the standard subscription rose by a dollar to $13.99 monthly, while the premium package jumped from $15.99 to $17.99. With many alternatives out there today, users in established markets might start looking elsewhere if they feel they are not getting value for money.

 

So, should I watch Netflix Stock?

Netflix stock tends to be pretty resilient. While it has suffered some significant short-term setbacks in recent years, it always seems to bounce back. These sorts of shocks are likely to continue, particularly if its latest quarterly figures fail to meet expectations. 

At the right price, Netflix is a good investment to have as part of a balanced portfolio. It will likely continue to eke out subscriber growth as it expands across the globe and continues delivering hit shows and movies to its loyal audience.

 

Quickfire Round

How many total subscribers does Netflix have?

Netflix had 204 million subscribers across the world at the end of 2020.

Does Netflix pay dividends?

No, Netflix does not currently pay dividends.

Is Netflix profitable?

Yes, the net profit at Netflix was $2.76 billion in 2020.

 

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Disclaimer Past performance is not a reliable indicator of future results.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.

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