Netflix (NFLX) has had a heck of a year, with 150% gains since Jan. 1. NFLX stock is making some investors nervous at these levels, however, including InvestorPlace’s head trader and strategist Serge Berger who wrote recently that Netflix could roll back as low as $100 per share in the coming weeks.
But those who bet against Netflix stock in the long term have been repeatedly proven wrong over the last few years. Because NFLX isn’t just up 150% since January, it’s also up about 650% in the last five years!
That’s because investors have bought in to the narrative of this streaming video giant as the go-to choice for consumers in the age of cord cutting. And when you look at the statistics, there’s good reason for this optimism — because if this was a contest, NFLX stock would have long ago been declared the official winner of the streaming wars.
Take a look at this analysis from Bespoke Investment Group, showing how Netflix actually continues to consolidate power despite its already mature business — with roughly half of customers surveyed reporting a Netflix account. According to its latest earnings report, NFLX stock boasts 65 million streaming customers worldwide — and that figure is still growing nicely, particularly among younger people.
No wonder the CEO of Dish Network (DISH) recently called Netflix “the most powerful content aggregator in the world today.”
And to complete the picture, consider that this rise is going on amid challenges elsewhere in the media business. Pay TV stocks have struggled recently — including broadcast giants Walt Disney Co. (DIS) which saw a double-digit decline after lowered guidance, and CBS Corp. (CBS), which slumped a bit less after reporting weak ad sales.
It all adds up to a war that Netflix seems to clearly be winning. After all, it’s not just about subscribers and momentum… it’s about profits, and NFLX stock continues to post strong margins despite big spending on international expansion and original programming. This profitability is what makes Netflix the real champ, and not just some pie-in-the-sky narrative for investors to cross their fingers over.
True, profits aren’t burning the house down, and the earnings multiples are huge. Because of this, NFLX stock may not be able to defy gravity forever, and Serge Berger may be right with its technical analysis of Netflix that shows the need for a short-term pullback.
But in the long run, NFLX is dominating the streaming biz and should remain at the top of the heap.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP.
