Netflix and Chill: Does the Stock Have More Downside?

After enjoying years of growth, Netflix (NFLX) is off to a rough start to 2016 as it has lost almost 30% of its value. Amid the current market turmoil, it is likely that Netflix will struggle to move higher. However, I think long term investors should use this opportunity to initiate a long position in the stock. The 30% drop has opened an attractive entry point for long-term investors and I think it is the right time to buy the stock.

Lot of growth prospect

The severe drop in its stock price could possibly be a virtuous buying opportunity, as the company carries on to post robust subscriber growth figures.

There are several reasons to be confident about Netflix, but one main reason is that the company still has enough growth prospects in the approaching quarters.
In its most recent quarter, the company added a record 5.59 million streaming subscribers globally. The company’s worldwide rollout in January acts as a key driver to surge its subscribers count. Netflix also anticipates to cross that record in Q1, adding than six million subscribers.

Netflix plans to drive its growth further in the U.S. and overseas by constantly enhancing its content. Adding new content is very important to Netflix’s growth. Keeping in mind the overseas market, the company plans to progressively add support for new languages in pursuance of attracting non-English speakers.

Netflix completed 2015 with an overall of 75 million streaming subscribers. Seeing the company’s unquestionable leading position in the market as well its sturdy momentum, it appears very likely that the company will have hundreds of millions of streaming subscribers count worldwide in the upcoming years.

Apart from this, Netflix is performing much better than Outerwall, as Outerwall’s shed 20 percent of its value just after reporting another poor quarter. Redbox endures to grind down Outerwall’s prospects, and reasonably so since it still accounts for a majority of its top line. It is likely not reasonable to equate Netflix’s worldwide kingdom to Outerbox’s domestic rental business, specifically since most of the company’s growth these days is impending from its immense overseas push.

Netflix damaged Outerwall by being the first to interrupt the DVD model, but it is also performing a superior job of maintaining the original stronghold. All in all, Netflix is a long-term winner and Outerwall is far behind Netflix’s lead.

Conclusion

Despite Netflix’s terrible start to 2016, I think the stock can turn around its fortunes in the near future. International expansion can drive Netflix’s future growth and should help sustain its strong subscriber growth. All these factors can help Netflix move higher in 2016, which is why I think the stock is a good buy.
Published on Feb 12, 2016
By Akshansh Gandhi

Copyrighted 2016. Content published with author's permission.

Posted in ...