As inflation cools down and people start to forget about their worries about an economic recession, the streaming service Netflix has begun to show potential as a worthy investment.
In the past year, the streaming service had a tough time in the market as it faced various challenges. However, it strategically bounced back by the end of the year, positioning itself as a tough nut to crack.
Considering the current situation and data from TOP trading platforms, investors believe there is a good possibility of the Feds slowing down with its interest rate hikes or even completely reserving it. Hence, the stock market is looking very promising, investors are yet again looking into the market for valuable stocks that have the most promise to shine this year, and it was deduced that the Netflix streaming service is a top contender on the list for several reasons.
Subscriber Growth Rate
Despite the challenges of 2022, the streaming service could strategically remain on top of the situation and overcome it. In addition, it came as a surprise Netflix was not just able to scale through the situation but also add 7.7 million new subscribers in the last quarter of 2022 after recording a loss of 1.2 million subscribers in the last three quarters. Since that announcement was made mid-January, the company’s stock has also significantly risen by 15% in a short while, with its share price going up to 23%.
Netflix’s CFO, Spence Neumann, also mentioned that they would not be going into the streaming business if they did not expect it to be bigger than a reasonable portion of their revenue, making investors even more confident in betting their money on Netflix’s stocks.
Studies show that a good majority of the new subscribers was due to some releases of highly ranked content on the streaming service close to the end of the year. Those releases included the likes of Wednesday, Glass Onion: A Knives Out Mystery, and others, which all broke the internet upon release.
Netflix Attains A Point Of Sustainable FCF
For a few years now, critics and analysts have forecasted that the streaming company may never be able to generate a positive FCF.
Studying the company’s moves, it was seen that Netflix had only been pouring funds into content production and licensing with no clear picture of profit-making.
However, Netflix proved it was not making those investment decisions blindly, as the company generated a positive free cash flow of approximately $1.6 billion in the past year.
In 2023, Netflix has revealed plans to continue spending on content production and licensing as it has in the past two years. Investment experts have predicted a high possibility of translating to massive cash generation as time passes.
Though many doubted the company’s ability to generate profit, many investors are now looking to get a slice of the company’s now favorable financed position.
Netflix’s Current Market Valuation
As the streaming service increased its sales from $3.6 billion to ten times that value in the past decade, the company shares now trade at a price-to-earnings ratio of 36. The total net income of the company in 2012 was above $17 million. However, the company recorded a record level high of $4.5 billion in 2022.
Furthermore, Wall Street analysts have forecasted that the streaming service will increase sales and net income by 10% and 20% annually for the next couple of years. However, the analysts added a condition of the company’s ability to leverage its advantage in the streaming industry, adding that the company could do better than expected on these terms.
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