Streaming companies like Netflix (NASDAQ:NFLX) were once in favor among the investing community. However, shifting winds in the market have put negative pressure on NFLX stock. Still, a potential partnership with Comcast’s (NASDAQ:CMCSA) NBCUniversal and Alphabet’s (NASDAQ:GOOG,NASDAQ:GOOGL) Google might convince you to buy Netflix shares for the long-term.
One of the main differences between Netflix and network television is that Netflix hasn’t relied on advertising. As a result, Netflix has been able to offer edgy, sometimes controversial content with mature themes.
The times are changing, though, and Netflix’s business model must adapt. Only time will tell whether the company will continue to thrive, and Netflix certainly has its skeptics. On the other hand, if Netflix can evolve and collaborate with the right companies, this streaming star might shine once again.
What’s Happening with NFLX Stock?
It’s no secret that the overall stock market, technology stocks in particular, peaked late last year. High-growth names like Netflix haven’t fared well during 2022’s second half, and NFLX stock is far below its prior peak.
Believe it or not, the Netflix share price reached $700 within the past year. Lately, though, the stock has been hovering near $180 and going nowhere fast.
That’s not a bad thing if you have considered starting a position in NFLX stock or adding to an existing one. Due to the share-price slide, Netflix’s trailing 12-month price-to-earnings ratio is now just 16.24. In other words, Netflix has gone from high-growth to high-value.
Granted, it is a scary proposition to buy a stock that has lost so much of its value. Besides, not everyone wants to invest in Netflix as the company announces another round of employee layoffs.
A Tale of Two Price Targets
Additionally, investors might be perturbed by Benchmark analyst Matthew Harrigan’s pessimistic $157 price target on NFLX stock. Among other concerns, Harrigan cited “the inflation-challenged and more price-sensitive consumer” as problematic for Netflix, which has a subscription-based pricing model.
Indeed, inflation is running hot and not everyone wants to pay for a Netflix subscription. However, Stifel (NYSE:SF) analyst Scott Devitt sees “optionality stemming from” Netflix’s inflation-beating solution: advertising-supported service tiers for customers.
Devitt’s $240 price target for NFLX stock is optimistic and it may be justified as Netflix could already be considering a collaboration to develop ad-based options. According to The Wall Street Journal, NBCUniversal and Google have “emerged as top contenders” for a possible partnership with Netflix.
Nothing has been set in stone, though, so let’s not jump the gun here. Apparently, a Netflix representative has stated that the company is “still in the early days of deciding how to launch a lower-priced, ad-supported option and no decisions have been made.”
What You Can Do Now
Just because no firm decisions have been made doesn’t mean that you have to sit on the sidelines. NFLX stock is trading at a relatively low valuation multiple and it might not stay bargain-priced for much longer.
Furthermore, an announcement about a partnership to develop ad-supported tiers could happen any day now. Therefore, it makes sense to hold at least a few Netflix shares in anticipation of a new chapter in the company’s evolving business model.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.