By
Bhushan Akolkar
April 12th, 2024
Goldman Sachs analyst is sure, Netflix (NFLX) stock is all set to soar 80% in a year from now. Here’s a look into how Netflix will lead the video-streaming industry which is likely to see stiff competition in the next few years.
Undoubtedly, Netflix is one company which outclasses all its peers in the media services industry. Known for its high-quality content production and distribution services, Netflix (NFLX) stock is also the favorite choice for investors.
Now, according to Goldman Sachs analysts, the Netflix stock is all set to soar 80% in a year from now. Analysts have given the potential target of $657 within a period of the next twelve months. Furthermore, the company itself is pouring heavy investments worth billions-of-dollars to scale the platform.
If the recent predictions by Goldman Sachs analysts turn to be right, we could see Netflix crossing even its previous high of $411. There are several reasons why Netflix could actually beat street expectations. At the Press time, the Netflix Stock is trading at a price of $369 with its market cap at $161 billion.
Let us take a look into why investors should be looking to have the Netflix stock in their portfolio.
1. Strong Fundamentals
In January 2019, Netflix beat the street expectations in terms of the growing subscriber numbers and earnings. The company saw the addition of a whopping 9 million subscribers to its video-streaming services. This shows that the fundamentals of the company are very strong at this point.
However, this hasn’t yet reflected in the Netflix stock price. Netflix announced its earnings report on January 17, post that, the S&P 500 index has climbed 9 percent. However, the price of Netflix stock has grown only by 4% in this time period.
Also, among the FAANG stocks (Facebook, Amazon, Apple, Netflix, and Google), Netflix has given minimum returns so far. For comparison, here’s a look into how much each stock gained after January 17. Facebook – 17%, Apple – 26%, Amazon – 7%, Netflix – 4%, Google – 11%.
2. Strong Original Content Upgrade
Netflix is scheduled to add massive original content to its platform with popular shows like The Crown and Stranger Things releasing their new series ahead this year. Furthermore, there’s a lot more brilliant content coming up on the platform that will keep the consumers hooked.
This will certainly help Netflix to steadily increase its user-base. However, one reason that is holding up the Netflix stock to perform better is the upcoming price hike. Netflix is likely to hike its subscription fees by a dollar or two in order to cover its costs. The price hike in its services might certainly not go well with the investors, however, this small hike will hardly have a negative effect on the subscriber number.
3. Netflix Ahead of Its Competitors
Although a number of big tech companies have announced their video-streaming services in the market, Netflix stands way ahead of them. Netflix is currently facing competition from tech giants like Amazon, Apple, and Disney. These companies are like to use their financial muscle to provide stiff competition to Netflix while trying to eat into its market share.
Earlier rumors suggested that Apple which is sitting on $250 billion cash pile could like purchase Netflix. However, last month, Apple went to announce its own video streaming service. Some analysts like Laura Martin at Needham, says that Apple is better positioned to scale fast and will eat into Netflix’s market share. Martin said:
“NFLX has an inferior competitive position to AAPL over time, as we see it, in both: a) customer acquisition costs; and b) content costs. AAPL has zero consumer acquisition costs since it will first target its captive 900mm global unique users, which are the wealthiest consumers in the world.
Content costs are lowered by the fact that Apple is creating a storefront service and will get a rev share of subscriptions sold to HBO, Showtime, etc.”
On the other hand, Mark Zgutowicz at Rosenblatt Securities considers Disney as a bigger threat. He said:
“We believe Disney will be particularly successful because of their intellectual property, history of producing high-quality content and balance sheet which enables them to invest substantial amounts of capital in content.”
It will be interesting to see where the video streaming industry goes from here. Leave your comments on who do you think will emerge as a major player in this game? And whether Netflix will lose its crown?