Why Netflix Looks Promising for 2019 and Beyond
Online stock trading is all about picking the right stocks after checking out what their future prospects are. And here's one stock that looks promising.
Netflix Had a Great 2018
Netflix ($NFLX) could have a really great 2019, even better than the 2018 it had where it was the best performing of the FAANG stocks by rising up 39.4%. Despite the broad market selloff, it was doing well and was close to entering the top 10 of the S&P 500's biggest gainers of 2018. However, Goldman Sachs believes that there’s more to come. It has set a price target of $400 for Netflix stock. That may be a decrease from the earlier $480 assessment Goldman Sachs made, but it still is a massive jump by nearly 48% from where it closed on Thursday evening, at $271 per share.
The Strange Pattern of Netflix
Looking back at few of the past years, Motley Fool's Rick Munarriz points out that Netflix had strangely made great gains in the odd-number years. In 2013 it made a gain of 298% while in 2015 it was 134%. 2017 only saw a 55% gain, but the even number years were even lesser, with 2014 only seeing a 7% gain and 2016 witnessing an 8% gain. And as we saw above, 2018 saw a 39% gain. By that token, 2019 should be the year when the stock shines again and trounces the market. But can that be taken as a valid point of reasoning?
S&P Global Market Intelligence data suggests that in the past 12 months Netflix reported close to $1.3 billion in terms of GAAP net profit. That was over twice of what it managed in 2017, and over 10 times of what it earned in 2015. But its free cash flow has been zero or even less than that. The streaming video services haven't provided Netflix with any positive free cash flow, even from as far as 2013. But Goldman Sachs believes that the absence of any cash profit attained from its business is the result of the company's large cash investments to build its business and acquire more streaming content for the coming decades. So that puts it in a strong position for the future.
Popular & Engaging Content Keeps Subscribers Hooked
"Bird Box" was a great success for Netflix. One-third of the 135.1 million subscribers of Netflix checked it out in the first week itself. "Black Mirror" has also been popular, particularly the interactive "Bandersnatch" episode. This episode allows viewers to stream different story paths. That has certainly made the content a lot more engaging.
And Goldman Sachs is of the opinion that this investment made by Netflix in content as well as technology and distribution will enable it to raise subscription growth significantly above the expectations of Street. This is valued by Goldman more than cash profits. The potential for further subscription growth is also seen by the fact that the user base of Netflix is 137 million and growing, leaving Amazon Prime Video, HBO and other streaming content providers in its wake.
With 2019 well and truly upon us, it is time to develop fresh trading strategies. Advanced direct access trading platforms can give you all the resources you need for successful online stock trading. Call TradeZero at 1 954-944-3885. You can also email email@example.com.
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