Netflix stock forecast: why it’s definitely one to watch
The Netflix stock forecast reflects disappointment at the slowdown in subscriber growth, but this was to be expected now lockdown restrictions are beginning to ease
The Netflix stock forecast has been weighed down by some challenging results in the second quarter. Although the streaming giant welcomed 1.5 million paid subscribers over this period, 500,000 more than its guidance forecast, this has drawn some rather unpleasant year-on-year comparisons.
The early months of the COVID-19 pandemic led to unprecedented growth for the entertainment giant as locked-down customers looked for things to watch, and a slowdown was inevitable as some economies started returning to normal.
Despite Netflix admitting that the pandemic had caused “lumpiness” in membership growth, there were some encouraging numbers for the NFLX stock forecast. Revenue over this latest quarter rose by 19% to hit $7.3 billion, while operating income increased by 36% year on year to reach $1.8bn. Netflix had 209 million paying customers around the world as of 30 June, slightly ahead of the company‘s own predictions.
In a letter to shareholders, Netflix said:
"The pandemic has created unusual choppiness in our growth and distorts year-over-year comparisons as acquisition and engagement per member household spiked in the early months of COVID."
Here are two metrics that help illustrate how the company is faring right now. Although engagement per household fell in Q2 when compared with the same period 12 months ago, it remains 17% higher when set against “a more comparable” 2019.
Subscriber retention levels are also said to be better than pre-COVID levels despite recent price increases. The company said this demonstrates “how much our members value Netflix and that as we improve our service we can charge a bit more.”
That may be true, but what weighs heavily on Netflix stock predictions is the threat posed by an ever-growing number of rivals in the streaming space, Disney, Amazon and Apple among them. Consumers can only stomach so many price increases, especially if they have signed up to multiple services. Viewers may also chop and change their memberships in line with the platforms that have TV shows and films they want to watch, meaning Netflix is under continuous pressure to deliver content that gets people talking.
A crucial target for the Netflix stock forecast is its goal to add 3.5 million subscribers on a net basis in Q3, 1.3 million more than the same period in 2020. NFLX says achieving this will mean its growth is consistent with pre-COVID annual levels.
Netflix forecast: game on
The Netflix stock price fell by about 3.3% in the trading session after Q2 results emerged. However, there were some headline-grabbing details in its letter to shareholders that suggest the company is not sitting still in its quest for eyeballs.
Interactivity has been a focus for NFLX in several of its flagship series, Black Mirror being one of them, enabling viewers to make decisions on how the story unfolds.
The company has now confirmed that it plans to expand further into games, explaining: "We view gaming as another new content category for us, similar to our expansion into original films, animation and unscripted TV. Games will be included in members’ Netflix subscription at no additional cost similar to films and series. Initially, we’ll be primarily focused on games for mobile devices."
Although these plans received a warm reception on Wall Street, some analysts are concerned about how much this will all cost. Netflix already spends billions of dollars on original content, and it will take aggressive investment to make a dent in the huge market share enjoyed by the likes of Microsoft, Sony, Nintendo and developers on Apple's App Store.
Pablo Pecastore of PP Foresight told Reuters that Netflix’s new endeavours amount to a “costly bold move” for the company. He said: “Making games for free will drive users, but it is not sustainable long-term as a business model.”
Investing.com's Jesse Cohen agreed, telling Reuters: “I don't see games becoming the next revenue stream to turbo-charge Netflix’s growth. It will need to explore other potential sources such as live sports broadcasting and advertising.”
NFLX price history
|Sep 24, 2021||590.45||0.59||0.10%||589.86||592.23||582.88|
|Sep 23, 2021||592.60||0.46||0.08%||592.14||598.55||588.35|
|Sep 22, 2021||590.65||20.19||3.54%||570.46||594.90||570.44|
|Sep 21, 2021||568.92||-7.51||-1.30%||576.43||580.32||568.74|
|Sep 20, 2021||572.36||-9.57||-1.64%||581.93||590.36||567.41|
|Sep 17, 2021||584.85||-0.26||-0.04%||585.11||589.50||574.36|
|Sep 16, 2021||584.60||2.01||0.35%||582.59||586.73||574.36|
|Sep 15, 2021||581.35||4.63||0.80%||576.72||583.94||574.36|
|Sep 14, 2021||576.76||-8.41||-1.44%||585.17||588.54||570.60|
|Sep 13, 2021||587.60||-10.94||-1.83%||598.54||601.83||582.15|
|Sep 10, 2021||598.10||3.76||0.63%||594.34||608.62||593.01|
|Sep 9, 2021||595.67||-7.24||-1.20%||602.91||608.27||595.47|
|Sep 8, 2021||601.33||-1.73||-0.29%||603.06||614.74||594.94|
|Sep 7, 2021||605.38||14.03||2.37%||591.35||613.00||584.35|
|Sep 3, 2021||590.35||5.50||0.94%||584.85||591.34||582.45|
|Sep 2, 2021||586.35||7.00||1.21%||579.35||597.94||577.90|
|Sep 1, 2021||581.45||18.89||3.36%||562.56||590.23||559.37|
|Aug 31, 2021||568.37||7.00||1.25%||561.37||568.87||560.88|
|Aug 30, 2021||565.55||10.70||1.93%||554.85||566.42||554.38|
|Aug 27, 2021||557.38||8.35||1.52%||549.03||563.17||546.84|
According to CNN Business, the Netflix stock forecast for 2021 is looking rather upbeat. The median view of 38 analysts indicates a 22.6% bump to $622.50 over the next 12 months, up to mid-July 2022. The high-end estimate predicts an 89% bump to $971. However, a low-end forecast of $342 has been made too, a 33.4% fall from the stock’s current level.
Overall, 29 analysts say that Netflix stock is a buy, while six expect it to outperform the wider market. Six hold ratings are in place, one analyst believes NFLX will underperform, and three have a sell rating.
Understandably, there is a lot of enthusiasm surrounding the Netflix stock forecast for 2025, and this question in particular: will Netflix stock go up?
Of course, it is difficult to know what lies ahead for NFLX. Although the streaming giant was a first mover in its space, competition is starting to heat up and traditional broadcast networks are now beginning to spend big bucks on their own offerings.
Netflix does not appear to be too fazed by this competition. Its letter to shareholders made it clear that the company expects to increase its share of screen time worldwide, and that there is a “long runway” for growth.
Netflix said: “We are still very much in the early days of the transition from linear to on-demand consumption of entertainment. Streaming represents just 27% of US TV screen time, compared with 63% for linear television, according to Nielsen. Based on this same study, Nielsen estimates that we are just 7% of US TV screen time.”
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The views expressed in this article are those of the writer and do not represent trading advice. Always remember your decision to trade depends on your attitude to risk, your expertise in this market, the spread of your investment portfolio and how comfortable you feel about losing money.