Netflix stock forecast: What impact has Squid Game made?

Squid Game is the show that’s got the world talking. Is it affecting the Netflix stock forecast?

Contents

It’s the company that has defined the idea of streaming TV shows and movies and, in doing so, has redefined the entire concept of television. Netflix has gone from strength to strength recently, with the success of South Korean thriller Squid Game drawing a lot of attention and new subscribers. But how has Netflix been doing recently? What might happen in the future? Let’s explore these questions and see if there is a Netflix stock forecast, too. 

An early year slowdown

One thing to notice is that the first six months of 2021 were a relatively slow time for Netflix. In terms of getting people on board to their subscription services, the company only managed to get 5.5 million new members, the worst half-year for the business since 2013. That was partially down to Netflix’s programme choice reflecting an overall slowdown in the TV- and movie-making industries caused by Covid-19 restrictions.

Netflix quarterly report: Squids in

When the company released its latest quarterly report on 19 October, it was good news for both Netflix and its investors. The business had picked up a further 4.4 million subscribers over the three months to 30 September which was higher than the 3.5 million it had predicted for itself previously. This increase in memberships was reflected in an increased revenue result, which came in at $7.483bn (£5.412bn) for the quarter, up from the same quarter in 2020’s $6.436bn by a little more than 16%. Although the growth in people taking out a Netflix subscription was pretty impressive, the company thinks it can do even better in the near future, forecasting that, in the current quarter, there will be 8.5 million new Netflix subscribers.

At least part of the reason for the growth was the buzz surrounding Squid Game. Since its release on 17 September, The show has been watched by around 142 million households around the world so far, making it one of the most successful dramas in history and the platform’s biggest show ever. Indeed, the programme’s popularity was such that, in a pre-recorded results video, some board members wore tracksuits inspired by the show. 

Netflix quarterly report: Beyond Squid Game

Other shows also boosted viewership, as CFO Spencer Neumann explained, saying: “As the quarter continued into September, we saw acceleration in our growth, which is what we had been hoping for and expecting but it was good to see as we got into the strength of our schedule. We had a couple of big hits.

“As you know, you mentioned one with Squid Game, La Casa de Papel [Money Heist] the first part of season five, but a lot of variety and quality programming throughout the quarter with things like Never Have I Ever, and He’s All That and Chestnut Man and Copenhagen at the end of the quarter. So that’s basically the way it played out as we got into the strength of the schedule on top of already kind of healthy business fundamentals, we saw a bit of an uptick in growth.”

It is also worth noting that average revenue per user (ARPU) was up 5% year-on-year, and the operating margin of 23.5% was up three percentage points from the same time period in 2020. One other thing that may have generated interest in Netflix was the news that it was purchasing the Roald Dahl Story Company, giving it the rights to make programmes based on the Welsh author’s classic children’s books. 

The increased revenues were reflected in the company’s earnings, with earnings per share (EPS) coming in at $3.19 for the quarter, significantly besting the $2.56 forecast by analysts Refinitiv, according to CNBC. Considering that in the same quarter in 2020, the EPS was $1.74, that represents a year-on-year growth of more than 83%.

However, company bosses admitted they could not be entirely sure how things would work out in a post-Covid world. Co-CEO Reed Hastings said: “We can’t come off the craziness of Covid and be confident of the next two years. So we’re going to push really hard.

“If you think about the big picture, we’re at 200-and-something million. That’s pretty small compared to pay-TV households, excluding China. So just matching the pay-TV households, [there is] plenty of room for growth. Streaming is developing, you know, at a great pace [with] all kinds of devices and competitors helping that market [to keep] growing.”

Netflix price history
Netflix price history – Credit: Currency.com

The markets respond to Netflix

As far as the markets were concerned, the latest Netflix results left them feeling decidedly unimpressed. When trading closed on 19 October, before the Netflix quarterly results came out, the Netflix stock price was $639. When trading resumed on 20 October, the price was $625.14, representing a drop of a little more than 2% overnight.

This Netflix stock news does have to be taken in context, however. The Netflix share price has been subject to some very bullish forces over the last few months. For instance, if we look back to 12 May, we can see that the markets closed that day with Netflix at $484.98. If we compare it to where it was at the end of trading on 19 October, we are looking at a rise of more than 30% during the course of a little over five months. So any short-term fluctuations of any kind have to be understood in relation to the overall medium-term movement of travel when it comes to a NFLX stock forecast.

Netflix stock forecast

In terms of a Netflix stock forecast, experts appear to have a mixed set of potential outcomes. When CNN Money surveyed 40 analysts for their Netflix stock forecast for 2021 and 2022, the final spread was more than $600. The most optimistic of the Netflix stock predictions for the next 12 months was $971, up 51.9% from where the Netflix stock price was at close of trading on 19 October. On the other hand, the most negative NFLX stock forecast was $342, down 46.5%. The overall median figure for where the Netflix share price would go over the next year was $667.50, a rather modest rise of 6%.

In terms of analyst recommendations, things were a bit clearer, although there were some dissenting voices. Out of 47 analysts surveyed, 30 recommended buying Netflix stock. Six said that it would outperform expectations, while seven suggested holding onto it. On the other hand, one analyst said the stock would underperform against expectations, while three recommended selling. 

FAQs

It might be. Netflix has certainly done well over the last 12 months. That said, you will need to do your own research, remember that prices can go down as well as up, and you should never invest more money than you can afford to lose. 

This is entirely a matter for you. While the majority of experts polled suggested that now might be, potentially, a good time to buy Netflix stock, experts are very often wrong. You will have to do your own research, remember prices can go down as well as up, and never invest more money than you can afford to lose. 

You can invest in Netflix today in tokenised assets at Currency.com. Tokenised assets are crypto derivatives whose value is linked to the value of a particular asset. Currency.com offers the opportunity to buy with leverage, with easily defined stop losses, and limits to close positions at a specified price. But while leverage will allow you to make bigger profits if a stock goes up, it will also magnify your losses if the price goes down.

Netflix
Daily change
615.78
Low: 612.67
High: 621.34

Further reading

The material provided on this website is for information purposes only and should not be regarded as investment research or investment advice. Any opinion that may be provided on this page is a subjective point of view of the author and does not constitute a recommendation by Currency Com Bel LLC or its partners. We do not make any endorsements or warranty on the accuracy or completeness of the information that is provided on this page. By relying on the information on this page, you acknowledge that you are acting knowingly and independently and that you accept all the risks involved.
iPhone Image
Trade the world’s top tokenised stocks, indices, commodities and currencies with the help of crypto or fiat
iMac Image
Trade the world’s top tokenised stocks, indices, commodities and currencies with the help of crypto or fiat
iMac Image