Internet television network Netflix ( NFLX ) has a commanding lead in the streaming video market but its growth has slowed.NFLX stock cratered in 2022 after the company reported two straight quarters of subscriber declines.However, after a corporate course correction, some people might be wondering: Is Netflix stock a buy right now?
X 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.
But Netflix announced April 18 that it is ending the legacy DVD service this fall.
In 2007, Netflix began offering a streaming video service with licensed movies and TV series.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.
Over the last several years, Netflix has been laser-focused on growing its global subscriber base.It wants to build a competitive moat with scale.It has been investing heavily in local-language original content production worldwide.
Netflix stock performance is linked to its net subscriber additions.
In the first quarter, Netflix added 1.75 million new subscribers worldwide, vs.forecasts for 2.2 million.It ended the first quarter with 232.5 million total subscribers worldwide.
Netflix stock dropped 3.2% on the first trading day after it posted first-quarter results late April 18.
Netflix Stock Fundamental Analysis In the March quarter, Netflix earned $2.88 a share on sales of $8.16 billion.Analysts polled by FactSet had expected Netflix to earn $2.86 a share on sales of $8.18 billion.On a year-over-year basis, Netflix earnings fell 18% while sales climbed 4%.
For the second quarter, Netflix predicted earnings of $2.84 a share on sales of $8.24 billion.But Wall Street had been projecting earnings of $3.07 a share on sales of $8.47 billion for the June quarter.
In the year-earlier period, Netflix earned $3.20 a share on sales of $7.97 billion.
After a humbling performance in 2022, Netflix says it is focused on profitability.It also hopes to increase its revenue with a lower-priced, advertising-supported service tier .
Plus, it is looking to monetize rampant account sharing on the service and turn freeloaders into paying customers.
The next catalyst for Netflix stock could be the company’s second-quarter earnings report, due in late July.
Netflix Content Draws Subscribers Since it started its original content push, Netflix has launched quite a few hit shows.They include “Stranger Things,” “Squid Game,” “Ozark,” “Outer Banks” and “Bridgerton.”
It also has premiered popular original movies such as “Bird Box,” “Extraction,” “Murder Mystery,” “The Old Guard” and “The Gray Man.”
Recent buzzworthy shows on Netflix include TV series “Wednesday,” “The Night Agent” and “The Diplomat.” Popular new original movies include “Don’t Look Up,” “Red Notice” and “Glass Onion.”
Meanwhile, Netflix is facing competition from traditional media companies.HBO Max from Warner Bros.Discovery ( WBD ) launched in May 2020.Comcast ( CMCSA )-owned NBCUniversal followed in July 2020 with Peacock.
Paramount Global ( PARA ) launched Paramount+ in March 2021.
Other services include Amazon ( AMZN ) Prime Video, Apple ‘s ( AAPL ) Apple TV+, Walt Disney ‘s ( DIS ) Disney+, Hulu and more.
Netflix Enters Video Game Market 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.
Since September 2021, Netflix has purchased four game studios.It bought Night School Studio, Next Games, Boss Fight Entertainment and Spry Fox.
It also has opened two new game studios.
Netflix currently offers more than 50 games to subscribers.They include action, arcade, puzzle, racing, sports and casino games.
Netflix Stock Technical Analysis On Oct.19, Netflix stock broke out of a nine-week consolidation period at a buy point of 252.09, according to IBD MarketSmith charts.NFLX stock ended the regular session on May 5 at 322.76.
Netflix hit its record high of 700.99 in November 2021.
Netflix stock has an IBD Relative Strength Rating of 93 out of 99.The rating shows how a stock’s price performance stacks up against all other stocks over the last 52 weeks.
It has an IBD Composite Rating of 88 out of 99.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.
Is Netflix Stock A Buy Right Now? Netflix stock is not a buy right now, but it soon could be.It has formed a cup-with-handle base with a buy point of 349.90, MarketSmith charts show.
In a positive sign, NFLX stock has found support at its 50-day moving average line .
Netflix stock ranks second out of 21 stocks in IBD’s Leisure-Movies & Related industry group, according to IBD Stock Checkup .The group ranks No.37 out of 197 industry groups that IBD tracks.Growth stock investors should focus on leading stocks in top 40 industry groups.
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 , MarketSmith and SwingTrader platforms.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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