Will Shares of Netflix Continue to Soar in 2021?

Will Shares of Netflix Continue to Soar in 2021?

Posted On October 19, 2020 1:33 pm

Netflix, inc. (NFLX) needs no introduction. This company started as a DVD-rental provider, and now this streaming giant currently has 193 million paid members in over 190 countries.

NFLX became even more popular during the current pandemic, when masses were locked up at homes and had limited means for entertainment. NFLX added nearly 26 million paid subscribers from across the world in the first two quarters of 2020.

With no proper vaccine developed yet and with the advent of the second wave of this novel coronavirus in major cities of the US and Europe, the future looks bright for this streaming leader.

This impressive performance and the potential upside based on a number of factors have helped NFLX earn a “Strong Buy” rating in our proprietary rating system.

Here is how our proprietary POWR Ratings system evaluates NFLX:

Trade Grade: A

NFLX is currently trading higher than its 50-day and 200-day moving averages of $504.78 and $433.32, respectively, indicating that the stock is in an uptrend. In fact, the stock’s 27% returns over the past six months reflects a solid short-term bullishness.

NFLX’s revenue increased 24.9% year-over-year to $6.14 billion in the second quarter ended June 2020. Its EPS rose 165% year-over-year to $1.59. With the robust growth in the digital entertainment platform, the stock gained 67.5% year-to-date. With free cash of $899.08 million, NFLX is sufficiently cash rich and can go ahead with its future expansion plans smoothly.

Other than creating unique original content, NFLX has become an active player in acquiring new content.  In September, at Toronto International Film Festival, the company acquired three high-profile films.  Additionally, the company has invested in providing theatrical exposure to its original movies.

On October 13th, NFLX removed the option of a 30-day free trial for potential subscribers in the United States. To replace the free trial, Netflix will be introducing new ways to try and attract potential subscribers, including posting some educational content on YouTube for free and other forms of content sampling. Recently, the company launched a portal to watch a number of episodes from its top series for free. Netflix also made one of its films available to watch without a Netflix subscription.

Buy & Hold Grade: A

In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade takes into account, NFLX is well positioned. The stock is currently trading just about 5% below its 52-week high of $575.37.

NFLX has gained 171.7% over the past three years, which can be attributed to its robust subscriber and revenue growth. The company’s revenue grew at CAGR of…

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