In a letter sent to Netflix shareholders on January 22nd, the company described its key successes in 2017, which suggest that continued growth is on the cards for the media giant.
“In 2017, we grew streaming revenue 36% to over $11 billion, added 24 million new memberships (compared to 19 million in 2016), achieved for the first time a full-year positive international contribution profit, and more than doubled global operating income,” Netflix stated.
After the company blew away Wall Street expectations, its stock rose strongly, which raised the question of whether its price had moved too quickly. For this reason, the stock was downgraded from “buy” to “hold” by Mr. Scott William Devitt, an influential analyst from Stifel, Nicolaus & Company, whose target price is USD 325.
However, Devitt strongly believes that Netflix’s business will keep growing this year, especially in light of stronger-than-expected numbers of new subscribers abroad, a very positive factor to consider as the US market approaches saturation. Netflix is also investing heavily in creating original content, which seems to be behind the recent surge in overseas subscribers.
According to Goldman Sachs, Netflix still represents a great growth stock that investors should buy. Usually, a growth stock doesn’t pay dividends, as the company in question prefers to invest earnings in capital projects, meaning that potential capital gains ought to be higher than the average market rate.
Netflix, along with Facebook, Amazon and Google, is one of the renowned FANG group of tech stocks, which all offer huge growth potential. Of course, these stocks are often considered comparatively risky, as their shareholders rely entirely on the companies’ success and rising stock prices to get a return on their investments.
Netflix is evolving in an industry that is expected to expand for years to come. The company’s revenues and earnings are also expected to increase, which should support its share price and provide better returns for investors over the short- and medium-term.
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