Individual investors are likely all interested in finding and owning businesses that can generate exceptional returns over the long term. The financial gains can be life-changing.
This is exactly what Netflix (NASDAQ:NFLX) has done for its long-standing shareholders. Top streaming stocks has generated a monstrous return of 14,860% over the past 20 years, turning a $10,000 investment into $1.5 million (as of June 27).
Let’s take a closer look at Netflix’s stunning rise. Then we’ll look at factors that could help determine whether the stock is a smart buy today.
Netflix is ​​a category creator
The Internet has changed many things in the economy. One of the areas where he has made a profound impact is in media and entertainment. While 20 years ago the primary way to consume video entertainment was through your television and cable subscription, today content can be consumed anytime, anywhere, on a variety of channels. different devices.
Netflix deserves much of the credit for pioneering the streaming industry as we know it. The management team rightly predicted that the internet would fundamentally change the way video entertainment was consumed. The company launched streaming in the US in 2007. The rest is history.
The company began introducing its service to international markets. And this helped Netflix rapidly grow its subscriber base and revenue. With no direct competition for a long time, the company attracted customers simply because it offered an impressive user experience. Consumers could watch a vast library of shows and movies, whenever they wanted and as many times as they wanted, all for a reasonable monthly price.
This monster success kicked off what is known as the streaming wars. Today, the number of streaming services on the market continues to grow, but none can match the scale of Netflix.
Dominate the media landscape
Netflix made $34.9 billion in revenue over the last 12 months. As of March 31, the company had 270 million subscribers in 190 countries. This is a truly global company.
Netflix has now reached a point where it is printing money. Free movement of capital totaled $6.9 billion in 2023, a major turnaround from a $3 billion loss in 2018. That prompted management to start buying back shares. And with each passing year, Netflix’s operating margin continues to grow. it rose to an exceptional rate of 28.1% in the first quarter.
Netflix is ​​able to spend a huge amount of money in absolute terms to produce and license content, which attracts new customers while minimizing churn. However, these fixed content costs are spread across a broad membership and sales base. This allows the business to benefit from a constant cash flow.
Is it too late to buy Netflix stock?
With a staggering 20-year return of almost 15,000%, which absolutely crushes the gains of both S&P 500 and the Nasdaq Composite IndexInvestors are right to wonder if it’s too late to buy stocks. Perhaps the opportunity has passed us by.
But there is one key reason to be optimistic. According to Wall Street consensus estimates, Netflix is ​​expected to grow its revenue and earnings per share at compound annual rates of 12.5% ​​and 29.8%, respectively, between 2023 and 2026. It’s clear that analysts see a bright future for the company.
Of course, forecasts should always be taken with a grain of salt. However, this should reassure investors that further revenue and profit gains are on the horizon.
To be clear, don’t expect Netflix to generate returns anywhere near what it has in the past, especially since it’s a more mature company today. Also, the current forward P/E ratio of 37.3 isn’t as compelling as it was a few years ago.
Should You Invest $1,000 in Netflix Right Now?
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Neil Patel and its clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix. The Motley Fool has a disclosure policy.
1 Amazing Stock That Turned $10,000 Into $1.5 Million In 20 Years was originally published by The Motley Fool
