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.
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 still offers its legacy domestic DVD-by-mail service, but no longer promotes it.
The company always believed its future was in digital delivery of video entertainment.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.
Stay-at-home orders during the Covid-19 pandemic drove business for Netflix and other home entertainment services.
Consumers watched more television because movie theaters, live music and sports were shut down during the pandemic.
But Netflix subscriber gains slowed after the economy reopened following the pandemic.
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 fourth quarter , Netflix added 7.66 million new subscribers worldwide.
Analysts had expected Netflix to add 4.57 million new subscribers.Netflix ended 2022 with 230.75 million total subscribers, with 32% of those in the U.S.and Canada.
Netflix stock jumped 8.5% on the first trading day after it posted Q4 results late Jan.19.
Netflix Stock Fundamental Analysis In the December quarter, Netflix earned 12 cents a share on revenue of $7.85 billion.
However, Wall Street had predicted earnings of 55 cents a share on sales of $7.86 billion.On a year-over-year basis, Netflix earnings plummeted 91% while sales climbed 2%.
For the first quarter, Netflix expects to earn $2.82 a share on sales of $8.17 billion.Analysts were looking for earnings of $2.98 a share on sales of $8.15 billion.In the March quarter last year, Netflix earned $3.53 a share on sales of $7.87 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 first-quarter earnings report, due in late April.
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,” “Ginny & Georgia” 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 Recruit” and “All of Us Are Dead.” 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 Feb.10 at 347.36.
Netflix hit its record high of 700.99 in November 2021.
Netflix stock has an IBD Relative Strength Rating of 95 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 93 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.It needs to form a new base in the right market conditions before setting a potential buy point.Check out IBD’s Big Picture column for the current market direction.
NFLX stock ranks first out of 21 stocks in IBD’s Leisure-Movies & Related industry group, according to the IBD Stock Checkup tool.The group ranks seventh 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 .
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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