NFLX has shown a trend of significant rallies, with numerous occasions of exceeding 30% gains within a two-month timeframe. Significantly, notable years such as 2012 and 2023 experienced several such surges, including uncommon jumps greater than 50%. Should these historical patterns repeat, similar catalysts could propel Netflix shares to impressive new heights, presenting considerable return potential for investors.
Detail of the Netflix streaming app on the screen of an Apple iPad Mini, taken on October 6, 2021. (Photo by Olly Curtis/Future Publishing)
Future Publishing
Netflix, countering some recent anxieties following its latest earnings report, has witnessed its stock increase by over 40% in the last year, supported by robust subscriber growth from effective ad-supported tiers and a strong content pipeline.
This momentum, further bolstered by a recent 10-for-1 stock split intended to expand investor access, positions the streaming giant for sustained growth as it continues to pursue diversified revenue streams and innovative engagement models. The stock trades on a split adjusted basis from November 17.
Factors That Could Elevate The Stock
- Ad Tier Expansion: The rapid growth of Netflix’s ad-supported tier, surpassing 190 million monthly active viewers, is expected to significantly enhance high-margin ad revenue, which is projected to more than double by 2025.
- Gaming & Engagement: Netflix’s shift toward TV-based party games and broader interactive content, with increased investment, can foster deeper user engagement and retention beyond traditional viewing.
- Content Powerhouse: An extensive content lineup in 2025, featuring eagerly awaited continuations such as Stranger Things Season 5 and Wednesday Season 2, backed by over $20 billion in content investment, is set to attract new subscribers and minimize churn.
NFLX stock may be volatile. A well-balanced asset allocation is not. Trefis’ Boston-based wealth management partner integrates strategy and discipline to mitigate market fluctuations.
Current Financial Outlook
It certainly helps if the fundamentals are solid. For more on NFLX, read Buy or Sell NFLX Stock. Here are some key figures that matter.
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- Revenue Growth: 15.4% LTM and 11.4% average over the last three years.
- Cash Generation: Nearly 20.7% free cash flow margin and 29.1% operating margin LTM.
- Valuation: Netflix stock trades at a P/E multiple of 46.2
Summary
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But How Does The Stock Perform In Adverse Conditions?
When assessing risk for Netflix, it is beneficial to observe how the stock responds during significant market downturns. NFLX declined approximately 56% during the Global Financial Crisis and experienced a 76% drop during the Inflation Shock in 2022. The 2018 Correction and Covid Pandemic also adversely affected it, with declines of around 44% and 23%, respectively. Even with all the growth and excitement, Netflix remains vulnerable when the market shifts downward. Downturns can hit hard, demonstrating that strong fundamentals can only provide so much protection during a panic.
However, the risk is not confined to major market crashes. Stocks can decline even amid favorable market conditions—consider instances such as earnings announcements, business updates, and changes in outlook. Read NFLX Dip Buyer Analyses to understand how the stock has rebounded from sharp declines in the past.
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