With its continued subscriber growth and profitability, Netflix (NASDAQ:NFLX) remains the best choice investors have when it comes to stocks of streaming platforms.
Netflix stock has powered ahead and grown stronger as its rivals continue to stumble and struggle. In the last 12 months, NFLX stock has risen 50%, including a 35% gain so far this year. Compare that with the 50% decline over the last year in the share price of rival Warner Bros. Discovery (NASDAQ:WBD), or the 33% drop in the stock of Paramount Global (NASDAQ:PARA). Netflix isn’t just the best investment option among streaming companies, it often seems like the only option.
Pure Streaming
Unlike its rivals, Netflix is not burdened with legacy television networks that are bleeding viewers and advertising dollars or movie studios that are seeing audience attendance decline. Netflix benefits from the fact that it is a pure streaming service. The company’s streamlined operations have helped to keep its financial results buoyant and allowed it to steadily grow its subscriber base, which were on full display with the company’s second-quarter print.
Netflix managed to beat Wall Street forecasts on the top and bottom lines due largely to a 34% increase in its advertising supported membership tier. The company announced Q2 EPS of $4.88 compared to $4.74 that was expected among analysts. Revenue in the quarter totaled $9.56 billion compared to $9.53 billion that was the consensus expectation on Wall Street. Sales rose 17% from a year earlier.
Subscriber Growth
As is the case with most streaming platforms, the success of Netflix is largely measured by its subscriber growth. And in this area, Netflix continues to shine. For Q2 this year, Netflix reported that its total memberships increased 16.5% year-over-year to 277.65 million worldwide. That number topped the 274.4 million expected on Wall Street. Popular shows such as Bridgerton and Baby Reindeer continue to attract consumers.
Management at Netflix said it is also benefitting from advertising revenue on its streaming platform and subscriber growth for its cheapest ad-supported tier. The company said the ad-supported tier has been gaining traction, with subscribers accounting for more than 45% of new sign-ups in recent months. The company has also cracked down on password sharing over the past 18 months, which has led to a boost in its monthly subscriptions.
Diversification
In addition to adding advertisements to its platform and cracking down on password sharing, Netflix is also diversifying its content. Specifically, the company is adding a growing amount of popular sports content and live sporting events to its platform. This fall, Netflix is broadcasting a live boxing match featuring Mike Tyson and it is airing live NFL football games on Christmas Day. The company begins broadcasting WWE wrestling in 2025.
The live sports are helping to attract more subscribers and advertisers to Netflix. On their recent earnings call, management singled out live sports, saying that they’re helping to boost advertising spending on the platform. This boost led Netflix to raise its forward guidance, saying it now expects full-year revenue growth of 14% to 15% this year compared to previous guidance of 13% growth.
Buy Netflix Stock
Netflix appears peerless among streaming companies and remains one of the strongest entertainment concerns. The company has been running circles around its competitors, is one of the few streaming platforms that is profitable, and continues to grow at a brisk clip. The addition of advertisements, a crackdown on password sharing, and a growing amount of live sports content have all been successful and are helping to keep Netflix ahead in the streaming wars. With its growth story still unfolding, Netflix stock is a buy.
On the date of publication, Joel Baglole 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
