Internet television network Netflix (NFLX) has a commanding lead in the streaming video market but its growth has slowed. Still, some people might be wondering: Is Netflix stock a buy right now?
XLos 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. Netflix shut down its legacy DVD service last October after 25 years in operation.
Netflix began offering a streaming video service with licensed movies and TV series in 2007. 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.
But Netflix stock tumbled 51% in 2022 as subscriber growth stalled. That year, it reported two straight quarters of subscriber declines. Growth rebounded in 2023 thanks to the addition of a lower-priced, advertising-supported service as well as a crackdown on unpaid account sharing. In 2023, NFLX stock rose 65%.
In the first quarter, Netflix added 9.33 million subscribers worldwide, vs. forecasts for 5.48 million. It ended the March quarter with 269.6 million subscribers worldwide.
But Netflix stock tumbled 9.1% on the first trading day after it posted first-quarter results late April 18. The company missed views with its sales outlook and said it would stop giving quarterly subscriber numbers next year.
Netflix Stock Fundamental Analysis
In the March quarter, Netflix earned $5.28 a share on sales of $9.37 billion. Analysts had modeled earnings of $4.52 a share on sales of $9.28 billion. On a year-over-year basis, Netflix earnings jumped 83% while sales climbed 15%.
For the current quarter, Netflix forecast earnings of $4.68 a share on sales of $9.49 billion. Wall Street was looking for earnings of $4.54 a share on sales of $9.52 billion in the second quarter. Netflix's guidance would translate to year-over-year growth of 42% in earnings and 16% in sales.
Dabbling In Live Content
On Jan. 23, Netflix announced a deal with TKO Group Holdings (TKO) to carry the WWE's flagship pro wrestling program "Raw" starting in January 2025. The 10-year deal is worth over $5 billion.
After experimenting with one-off events, Netflix is making a major commitment to live entertainment with the TKO deal. On Netflix, "Raw" will be available initially in the U.S., Canada, U.K. and Latin America, among other territories, with additional countries and regions to be added over time.
Also, Netflix plans to televise a live boxing match between Jake Paul and Mike Tyson on July 20.
Netflix Content Draws Subscribers
Since it started its original content push, Netflix has launched quite a few hit shows. They include "Stranger Things," "The Crown," "Squid Game," "Wednesday," "Ozark" and "Bridgerton."
It also has premiered popular original movies such as "Bird Box," "Extraction," "Murder Mystery," "The Old Guard" and "Red Notice."
Recent buzzworthy shows on Netflix include TV series "3 Body Problem," "Avatar: The Last Airbender" and "The Gentlemen." Popular new original movies include "Damsel," "Irish Wish" and "The Mother."
Meanwhile, Netflix is facing competition from traditional media companies. That includes Max from Warner Bros. Discovery (WBD), Paramount+ from Paramount Global (PARA) and Peacock from Comcast (CMCSA)-owned NBCUniversal.
Other major services include Amazon (AMZN) Prime Video, Apple's (AAPL) Apple TV+, Walt Disney's (DIS) Disney+ and Hulu.
In 2024, the streaming video market could see consolidation, analysts say.
In an April 5 report, Pivotal Research Group analyst Jeffrey Wlodarczak proclaimed that "Netflix has won the streaming wars."
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 90 games to subscribers. They include action, arcade, puzzle, racing, sports and casino games.
Netflix Stock Technical Analysis
On Dec. 18, Netflix stock broke out of a 22-week consolidation pattern at a buy point of 485, according to IBD MarketSurge charts.
NFLX stock ended the regular session on April 19 at 555.04.
Netflix hit its record high of 700.99 back in November 2021.
Netflix stock has an IBD Relative Strength Rating of 92 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 a best-possible IBD Composite Rating 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?
No, Netflix stock is not a buy right now. It is extended beyond the 5% buy zone of its recent breakout.
Netflix stock will need to form a new base in the right market conditions before setting another potential buy point.
In a negative sign, NFLX stock is trading below its 50-day moving average line. Also, it has an Accumulation/Distribution Rating of D+, indicating selling by institutional investors.
Netflix stock ranks first out of 19 stocks in IBD's Leisure-Movies & Related industry group, according to IBD Stock Checkup. The group ranks No. 42 out of 197 industry groups that IBD tracks. Growth stock investors should focus on leading stocks in the 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, MarketSurge and SwingTrader platforms.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
YOU MAY ALSO LIKE:
Is Apple Stock A Buy Right Now? Here's What IBD Charts Show
Is Microsoft Stock A Buy As Software Giant Touts Artificial Intelligence?
Learn How To Time The Market With IBD's ETF Market Strategy
Looking For The Next Big Stock Market Winners? Start With These 3 Steps
Get Stock Ideas From IBD Experts Each Morning Before The Open
