Internet television network Netflix has a commanding lead in the streaming video market. And its addition of an advertising-supported service tier has reinvigorated growth. Many investors might be wondering: Is Netflix stock a buy right now?
Los Gatos, Calif.-based Netflix started in 1997 as a subscription DVD-by-mail service in the U.S. That innovative service ultimately drove movie rental giant Blockbuster out of business. Netflix shut down its legacy DVD service in October 2023 after 25 years in operation.
Netflix began offering a streaming video service with licensed movies and TV series in 2007. It later entered the content production business and released its first major original series, "House of Cards," in February 2013.
Netflix offers its subscription video-on-demand service in over 190 countries.
Subscriber Growth Drives Netflix Story
Netflix stock has benefited from the cord-cutting trend as people quit traditional pay-TV services.
In recent years, Netflix has been focused on growing its global subscriber base. It wants to build a competitive moat with scale. It has been investing heavily in local-language content production worldwide. Netflix stock performance is linked to its net subscriber additions.
But Netflix stock tumbled 51% in 2022 as subscriber growth stalled. That year, it reported two straight quarters of subscriber declines. Growth rebounded in 2023 thanks to the addition of a lower-priced, advertising-supported service as well as a crackdown on unpaid account sharing. In 2023, NFLX stock rose 65%.
In the third quarter, Netflix added 5.1 million subscribers, vs. forecasts for 4 million. It ended the September quarter with 282.7 million subscribers worldwide, up 14% year over year.
Starting with the first quarter of 2025, Netflix will stop reporting quarterly subscriber numbers. The company said it is focused on revenue and operating margin as its primary financial metrics. It will use engagement, or time spent on the service, as an indicator of customer satisfaction.
Netflix Stock Fundamental Analysis
In the September quarter, Netflix earned $5.40 a share, up 45% year over year, on sales of $9.83 billion, up 15%. Analysts polled by FactSet had expected earnings of $5.12 a share on sales of $9.77 billion.
For the fourth quarter, Netflix forecast $4.23 in earnings per share, up 100%, on sales of $10.13 billion, up 15%. Analysts had been modeling Q4 earnings of $3.90 a share on sales of $10.04 billion.
At least 19 analysts increased their price targets on Netflix stock after the company's Q3 report on Oct. 17.
Netflix stock jumped 11.1% to close at 763.89 the day after its earnings report. On Nov. 11, it reached an all-time high of 806.82.
Dabbling In Live Content, Games
On Jan. 23, Netflix announced a deal with TKO Group Holdings to carry the WWE's flagship pro wrestling program "Raw" starting in January 2025. The 10-year deal is worth over $5 billion.
After experimenting with one-off events, Netflix is making a major commitment to live entertainment with the TKO deal. On Netflix, "Raw" will be available initially in the U.S., Canada, U.K. and Latin America, among other territories, with additional countries and regions to be added over time.
Also, Netflix plans to televise a live boxing match between Jake Paul and Mike Tyson, scheduled for Nov. 15.
On May 15, Netflix announced that it will stream two NFL games on Christmas Day this year. Plus, it will stream at least one Christmas Day football game in 2025 and in 2026.
The addition of live content will help attract advertisers to Netflix, Argus Research analyst Joseph Bonner said.
To create a stickier service, Netflix added mobile video games as part of its subscription offering in November 2021. Subscribers can play the games on Android and Apple iOS smartphones and tablets.
Netflix currently offers more than 80 games to subscribers. They include action, arcade, puzzle, racing, sports and casino games.
Netflix Content Draws Subscribers
Since it started its original content push, Netflix has launched quite a few hit shows. They include "Stranger Things," "The Crown," "Squid Game," "Wednesday," "Ozark" and "Bridgerton."
It also has premiered popular original movies such as "Bird Box," "Extraction," "Murder Mystery," "The Old Guard" and "Red Notice."
Recent buzzworthy shows on Netflix include TV series "The Diplomat," "The Gentlemen" and "3 Body Problem." Popular new original movies include "Woman of the Hour," "Don't Move" and "Rebel Ridge."
Meanwhile, Netflix is facing competition from traditional media companies. That includes Max from Warner Bros. Discovery, Paramount+ from Paramount Global and Peacock from Comcast-owned NBCUniversal.
Other major services include Amazon Prime Video, Apple's Apple TV+, and Walt Disney's Disney+ and Hulu.
On Aug. 7, Netflix stock rose on news that Disney is raising prices for all stand-alone tiers of Disney+, Hulu and ESPN+ in the U.S. this fall, as well as for most of its bundles. Disney's move opens the door for Netflix to raise its prices, Jefferies analyst James Heaney said.
Netflix Stock Technical Analysis
Netflix stock has an IBD Composite Rating of 98 out of 99, according to IBD Stock Checkup. IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
Netflix stock has an IBD Relative Strength Rating of 89 out of 99. The rating shows how a stock's price performance stacks up against all other stocks over the last 52 weeks.
Netflix stock ranks first out of 20 stocks in IBD's Leisure-Movies & Related industry group, according to IBD Stock Checkup. The group ranks No. 46 out of 197 industry groups that IBD tracks. Growth stock investors should focus on leading stocks in the top 40 industry groups.
On Aug. 20, Netflix stock broke out of a cup base at a buy point of 697.49, according to IBD MarketSurge charts. It trended sideways for about eight weeks before surging above the 5% buy zone.
Further, it topped a three-weeks-tight pattern with a buy point of 773 on Nov. 6, according IBD analysis.
Is Netflix Stock A Buy Right Now?
Netflix stock is not a buy right now. It is extended beyond the 5% buy zone of its recent breakout.
Netflix stock ended regular-session trading on Nov. 11 at 805.44.
Be sure to keep an eye on the overall stock market. If it turns negative, don't try to fight the general stock market direction. Check out IBD's Big Picture column for the current market direction.
To find the best stocks to buy and watch, check out IBD's Stock Lists page. More stock ideas can be found on IBD's Leaderboard, MarketSurge and SwingTrader platforms.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
