Netflix (NASDAQ: NFLX), the pre-eminent streaming service and content provider, is up a stunning 33% year to date. Granted, in the past year Netflix stock is only up about 34%, which means there were some lean months in there when FAANG stocks got hit with the rest of tech. But given the performance of the major indexes over the same timeframe, even that 34% return is pretty strong.
But the bullish story carries beyond just NFLX. All the FAANG stocks have been roaring back in 2019.
The thing with Netflix stock is that it isn’t coming back from a slow quarter or weakening revenue or troubles with governments over privacy issues. It has just been plugging along grabbing subscribers, adding to programming and expanding services.
Granted, Netflix stock is trading at a staggering trailing P/E of 130. But it has 139 million subscribers in 190 countries and while it may be running out of countries, it still has plenty of potential subscribers to tap into.
And the thing about NFLX is, there is a knock-on effect to it since its content has such a buzz around it almost continually. And because of it powerful content, it is even changing lifestyles.
In an article in Forbes, a recent study is mentioned where 30% of adults aged 18-54 would give up sex in exchange for Netflix. And 10% admitted dating someone just to use their Netflix account.
There are few services in history — especially that cost around $10 a month — that have those compelling statistics.
Netflix Stock Has Built a Moat of Original Content
And the fact is, it’s Netflix’s programming that is such a draw. While other media and e-commerce companies provide content, no one is focused on this specific sector like NFLX. And that has created significant competitive advantages.
For example, while movie companies have to lean toward feature length films, and television studios establish their brand in episodic content, NFLX has been a format agnostic, since it owns the distribution platform. It doesn’t have to worry about selling its products to distributors or networks.
NFLX also bypasses censorship issues since it’s a subscription-based service and usually falls under different regulations than free television or movie theater content with ratings boards. This is of great help in global markets since standards can vary widely.
What’s more, content and streaming is the sole focus for NFLX. Netflix isn’t selling cloud computing or search or advertising or blankets. It does content. And because of that its revenue is driven by one focused thing — good content.
For example, the new buzz is that Spike Lee is in distribution talks with Netflix for his next movie. And at Berlin’s Drama Series Days, Netflix just unveiled new German and Norwegian programming (much of which will likely be dubbed into English and other languages for global distribution).
And India is still a work in progress, although NFLX is already distributing shows locally and internationally as a first step.
Yes, Netflix stock is seemingly expensive, but its growth path is still strong and bright.
Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
