We all know Netflix as the streaming service with all our favourite television series and movies. With its unique and disruptive entry as a streaming video service in 2007, it drove movie rental giants out of business such as Blockbuster. The ad-free, HD quality digital delivery service has won over our hearts as an ideal entertainment service. The question is – is its stock worth investing in right now? Netflix’s fourth-quarter earnings will answer this question.
In the last year, quarantines and country-wide lockdowns due to the COVID-19 pandemic have driven consumers to watch more television due to the inability to go to movie theatres, concerts, watch sports games, or engage in likewise entertainment activities. With traditional television streaming already less popular before the pandemic, binging shows on Netflix is what most consumers have turned to while staying at home.
In fact, Netflix added 8.51 million subscribers in the last quarter, topping Wall Street’s estimate by 2.01 million. On January 19, 2020, the day of its earnings report the stock jumped 12% to approximately 562.50 in after-hours trading compared to the regular day session where it rose 0.8% to 501.77. The day after its earnings report, the Netflix stock spiked to a record high of 593.29. Furthermore, Netflix forecasts earnings of $2.97 a share on sales of $7.13 billion as compared to the year-earlier period of $1.57 a share on sales of $5.77 billion. This forecasts an increase of $1.40 a share and $1.36 billion in sales.
The aforementioned quantitative facts, along with the prediction of free cash flow at break-even in 2021 and turning positive in 2022 is providing investors with confidence and optimism. Although Netflix has competitors such as Amazon Prime Video, Apple TV+, Disney+, and more, Netflix was the first in its industry and therefore remains the most known and subscriber heavy with 183 million subscribers. As such, the Netflix stock is a buy right now. However, as always, make sure to keep an eye on the overall stock market in case it turns in a negative direction.